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Midwest Business Funding - Partner with a Lender vs. Broker: How to Choose the Best Working Capital Loan for Your Small Business

Partner with a Lender vs. Broker

When it comes to finding needed capital for your business, there are a few important aspects to keep in mind during your search. In today’s world with the swiftly growing digital age, funding options are everywhere we click. Many business owners overlook the source and whether they’re talking to a broker or a lender. They just want to get the funds they need and get the deal done. Here’s a synopsis of this message: look for a lender you can partner with and trust long term and make sure you know the difference between a lender and a broker.

Now let’s go deeper. A lender uses their own money, has their own set of guidelines, makes decisions, and lends directly to the end-user or the individual borrower or a company. A broker on the other hand would get a deal and then shop it with multiple lenders. The broker does not have control over their own guidelines or their own money. They’re not using their money, rather partnering with others to use their money. And, typically they make their money by charging a broker fee or a service fee to get the deal done.

Dealing with a broker might cause unnecessary frustrations. Since there are layers, complications in the transaction are easy to come by. Brokered loans might cost more money because of a markup. Ultimately, the broker is not in control of the situation and they really are at the mercy of all their lenders so this causes headache to the business owner often. And, beware, oftentimes brokers will disguise themselves as lenders. They will say that they work directly for the lender.

Here are a few questions that business owners should ask when looking for capital for their business:

  • Are you a direct lender?
  • Are you using your own funds?
  • Who are the decision-makers in this process?
  • Do you know the underwriting guidelines and the process to get the deal done quickly and smoothly?


Please note that even though I strongly advise lender relationships, like Midwest Business Funding, in some circumstances it could help the business owner to use a broker because they are shopping it to multiple lenders. That is the upside, however, I would say most of the time those brokers don’t have control of the whole process and it can get cumbersome.

As a direct lender, Midwest Business Funding is invested in the community and we respect our referral partners, which is the primary source of our new clients. Since we get ninety-five percent of our business from referrals, we do not overstep boundaries with them. We keep our referral partners involved every step of the way (if they want to be). We have a mission to make them look like the hero. For example, we’ve been brought quite a few deals from business or commercial bankers. Sometimes these bankers are working towards a new relationship with the potential client and they have come up with a solution by calling us. One common scenario is if the bank is not able to lend the client money, so the bank brings us into the situation as a partner. The bank builds the relationship and introduces us to help with the loan and the bank gets those deposits from the money we were able to help the client secure. Sometimes the banks need to look stronger with their offerings to gain a new client and they will position themselves with us to win new client deals. We do the lending, they do the banking.

If you or anyone you know needs a trustworthy partnership for business funding, take a step and fill out our application here.

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