Glossary · broker

Loan broker

Also called business loan broker, commercial finance broker, funding advisor.

An intermediary who places a borrower's file with lenders for a commission, sitting between the business and the money without lending any of it.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

Overlapping with ISO and often the same job under a different name. The distinction worth drawing is one of breadth and product: an ISO typically has signed agreements with a panel of short-term funders and works the merchant cash advance and daily-debit market; a loan broker more often works across bank, SBA, equipment and ABL products, where the transaction is genuinely a loan.

Both are paid on placement and neither has money at risk.

How they are paid

  • A commission from the lender, calculated on the funded amount
  • A spread built into the rate presented, where the lender allows it
  • A fee charged directly to the borrower, more common in SBA and commercial real estate packaging than in short-term funding
  • A combination, which is where disclosure gets murky

What a competent one is worth

Genuine value exists. A broker who knows which lenders are actually funding a given industry this quarter, who packages a file so it does not get declined for a curable reason, and who runs an SBA process to a timetable, saves a borrower real time and often real money. That broker is worth paying.

Regulation

Broker licensing is state law and inconsistent — some states license commercial loan brokers, most do not. Several states' commercial financing disclosure statutes impose obligations on brokers as well as providers, and a handful regulate advance fees charged by brokers. What almost no state imposes is a duty to act in the borrower's interest.

Where this one catches people

There is no fiduciary duty. A broker is not your adviser in any legal sense, however the relationship feels after three weeks of daily phone calls, and their compensation frequently rises with the size and the price of the deal you accept. Three questions cut through it: who pays you, how much, and does it come out of my funding. A broker who answers all three plainly is worth working with. One who says "the lender pays me, it costs you nothing" is describing the direction of the payment, not its source.

Where you will meet this term

Merchant Cash Advance Working Capital Term Loan SBA Loan Equipment Financing

Read next

Buy rateThe price the funder is willing to fund at, before the broker's markup, with the gap between it and the rate … Good faith depositMoney a borrower is asked to pay before funding, nominally to cover third-party costs or demonstrate commitme… Hard credit pullA credit report request tied to an actual application for credit, recorded on the report where other lenders … ISO agreementThe contract between a funder and the sales organization that brings it deals, setting commission, clawbacks … Independent sales organization (ISO)A sales firm that originates funding applications and places them with funders for a commission — the party m… Lending licenseState authorisation to make or broker loans, required in some states, for some products, at some sizes — and … Origination feeA charge for putting the transaction on the books, usually deducted from the disbursement rather than billed,…

Loan broker — common questions

What does loan broker mean?

An intermediary who places a borrower's file with lenders for a commission, sitting between the business and the money without lending any of it.

Where does loan broker catch people out?

There is no fiduciary duty. A broker is not your adviser in any legal sense, however the relationship feels after three weeks of daily phone calls, and their compensation frequently rises with the size and the price of the deal you accept. Three questions cut through it: who pays you, how much, and does it come out of my funding. A broker who answers all three plainly is worth working with. One who says "the lender pays me, it costs you nothing" is describing the direction of the payment, not its source.

Is loan broker the same as an interest rate?

Loan broker is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does loan broker apply to?

Merchant Cash Advance, Working Capital, Term Loan, SBA Loan, Equipment Financing.

Is there a worked example of loan broker?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside loan broker?

Buy rate, Good faith deposit, Hard credit pull, ISO agreement, Independent sales organization.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.