Networking is one of the most important parts of business loan brokering and there are many opportunities for networking to take place. But, how do you know that the brokers that you are working with are playing by the rules?
Working with other brokers is part of the job and with your reputation on the line, you should do everything you can to make sure that the brokers within your network are honest, trustworthy and experienced enough to know the rules of the game. It can be tough to determine which brokers are good and which are bad but if you know what to look for, you will be able to spot them more quickly and easily.
1. Deep Expertise
There is a relatively low bar for entry into the world of loan brokering. You need a laptop and cellphone, a website and business cards, and not much more. This means that many loan brokers are not actually true experts in commercial finance. Their lack of knowledge will ultimately hurt their clients and — if you partner with them — hurt your clients as well. So have a vetting conversation with them where you are asking probing questions. It can appear casual, but be sure to check their familiarity with industry terminology, financing products, and recent changes in the marketplace.
2. Limiting Products
Ask to see a list of their commissions on the products that they are most actively pushing. Are they limiting what they offer because it pays more handsomely than other products? This could mean that they are not thinking about the needs of the client, but more about their own desire to make money. A good broker will offer every product and every resource available in order to ensure that clients will get the funding that they need.
3. Prioritizing
Are they fiduciaries? This is a legal term that means the advisor must put the needs of the client before their own. It is important to know whether a broker prioritizes clients’ financial interests and puts them ahead of themselves and, of course, ahead of the needs of the firm. Many brokers are more concerned with meeting quotas, and their own financial gain than they are with the needs of the clients that they work for. This is another trait that could make or break your reputation should you choose to work with a broker or lender that does not have their priorities in line.
4. Bouncing
Look carefully at the broker’s background. If you notice that they have worked at a lot of different places, you have the right to look for customer complaints, fines, and other red flags. When a broker gets in trouble at one firm and moves on to another and another and another, it is often referred to as “cockroaching” in the industry. Be aware of your colleague’s history and do not do business with someone who has made a career of changing jobs. On the other hand, Good work history will show a broker giving a lot of time and energy to one firm where they will have built trusting relationships with other brokers. lenders, and of course, clients.
5. Funding
Ask for records of some of the larger loans that they have worked on. Look for additional points that may have been added for undisclosed or irrelevant people or firms. This is one of the biggest red flags that you should be aware of. Many brokers will charge for every single person they can think of in order to take the extra money for themselves. Business loan brokers should be more concerned with obtaining funding for the client than they are about listing every person who has come in contact with them over the course of the loan application. The janitor, the client’s friend, and the broker’s office supply delivery guy have nothing to do with the loan. If you notice that a broker is adding people and adding points to a loan, steer clear!
Working with other brokers is part of being a business loan broker. You may come across some brokers that fit these descriptions to a T, and others may be honest and caring toward their client’s needs. Always get to know the brokers that you will be working with and make sure that you keep your own reputation pristine with the partnership. Not only will you feel better about yourself, your team and your firm, but your clients will appreciate that they can trust you with their financial needs.