Commercial loan brokers act as an intermediary. What they do is act as a liaison between borrowers and lenders so that the right commercial loan can be obtained. Brokers can work independently on their own, start their own firm, or contract their services to consult on certain projects. Sometimes financial institutions don’t want to offer a loan that a business may need. Your job as a commercial loan broker is to find an institution that will or to locate one that will offer a better rate.
If you have a passion for the financial industry, then you’ll have taken the first step toward knowing how to start a commercial loan broker business. You’ll then want to follow these additional steps to create a successful business venture.
1. Look At What Your Licensing Requirements Are Going To Be.
Although most states don’t require a commercial loan broker to be licensed to bring financial institutions and businesses together, there are some that do. This may apply to only real estate loans, only non-real estate loans, or may be required for both. If you are required to be licensed, then you will need to meet the specific licensing requirements that are necessary, which could include certification and testing.
2. Get Your Structure Into Place.
You’ll want to know what the local demand for your services is going to be. This will give you an idea of how much of a percentage of the loan amount is that you’ll be able to charge as a fee. Most commercial loan brokers negotiate a percentage that is between 0.5-2.5% of the loan, with larger loans having smaller commissions. Some brokers may also have an application fee that is charged for services rendered at the time of the application. In the United States, the average application fee is $2,000.
3. Begin The Networking Process.
You’ll have extra work to do here as a commercial loan broker when compared to other businesses. This is because you’ll need to create a network of financial institutions and a network of businesses that need loans. Start on the supply side of things so that banks and credit unions will know that you’re looking to help them make some money. Then begin on the demand side to put people in touch with the funding that they may need.
To make sure that you’re not wasting time on the demand side of things, it will be important to create a system of pre-qualification that will help you know who is ready for a loan and who is just hopeful that they’ll get a loan. Evaluate receivables, assets, and whatever collateral may be available in addition to the current state of their credit.
4. Prepare To Be Patient.
Most loans aren’t going to close in a few days. It may take up to 60 days for a small business loan to close, while larger commercial loans may take 180+ days. This is why it is important to have the application fee in place in addition to the commission on the loan. If you’re waiting 6 months to get paid and the deal falls through on the last day, without the application fee, you’ve just eaten 6 months of work.
5. Develop Your Prospects.
In many industries, the cold calling field is dead. That isn’t the case in the commercial loan brokering business. Sometimes businesses are in need of cash and just don’t know how to secure the loan that they need to get. A phone call from you can be like a breath of fresh air. If you have a website that coordinates with your cold calling efforts, you can create a combination of marketing that will let people research the value of your services on their own and do most of the leg work for you.
The benefit of this combination is clear: you develop your prospects by letting them do most of the work. You just have to close the deal. Since your job is to close deals anyway, the marketing skills translate directly to the sales skills for a consistent experience.
6. Earn Your Worth.
You can work from your home office or you can hire dozens of loan officers and work from a central commercial location. The choice really is up to you. The only roadblock that will be in your way with this type of business are the ones that you put in the way. You really can earn what you’re worth when you are a commercial loan broker.
Knowing how to start a commercial loan brokering business is dependent on your ability to market your services to those who need them. If you can communicate a consistent message of value to the supply and demand aspects of your business, then you can have a successful career doing something that you love.