They Call Them Brokers Because They Break Deals

The Web Lender Portal

A broker is an individual or firm that charges a fee or commission for performing a financial service need.

Discount vs. Full Service Brokers

Discount brokers are able to execute any type of trade on behalf of a client, for which they charge a reduced commission in the range of $5 to $15 per trade. Their low fee structured is based on volume and lower costs. They don’t offer investment advice and brokers are usually paid on salary rather than commission. Most discount brokers offer an online trading platform which attracts a growing number of self-directed investors.

Full-service brokers offer a variety of services, including market research, investment advice, and retirement planning, on top of a full range of investment products. For that, investors can expect to pay higher commissions for their trades. Brokers are compensated by the brokerage firm based on their trading volume as well as for the sale of investment products. An increasing number of brokers offer fee-based investment products such as managed investment accounts.

Brokers Held to a Lower Standard

Brokers are registered with the Financial Industry Regulatory Authority (FINRA), the broker-dealers’ self-regulatory body. In serving their clients, brokers are held to a standard of conduct based on the “suitability rule,” which requires there be reasonable grounds for recommending a specific product or investment. The second part of the rule, commonly referred to as “know your customer,” addresses the process of due diligence a broker must use in determining the reasonable grounds of the recommendation. The broker must make a reasonable effort to obtain information on the customers financial status, tax status, investment objectives and other information that can be used in making a recommendation. This standard of conduct differs significantly from the standard applied to financial advisors registered with the Securities and Exchange Commission (SEC) as Registered Investment Advisors (RIAs). Under the Investment Advisers Act of 1940, RIAs are held to a strict fiduciary standard to always act in the best interest of the client, while providing full disclosure of their fees.

Commercial Loan Brokers: The Red Flags

If you do choose to work with a commercial loan broker, what kind of behavior should make you concerned?

Well, if you come across any of these 6 red flags, think twice about continuing to work with the business loan broker in question.

No physical address is listed on the broker’s website.
Business owners shouldn’t be working with commercial loan brokers that lack an actual address on their websites. If they don’t have a physical office, it might be a sign that they’re running a shady operation.

No connecting phone number.
Talking about your loan options over the phone with a real person is helpful for any business owner trying to make their final decision on their loan product. Good commercial loan brokers will have a way for their clients to reach them and talk to someone. If they don’t list a phone number or you only get a automated recording, the commercial loan might not be the real deal.

No privacy.
If the commercial loan broker doesn’t have a privacy policy in place or doesn’t make theirs clear, this might be a sign that the broker could sell your business and personal data to third parties. No one wants to be flooded with sales calls and junk mail, so make sure your commercial loan broker has a privacy policy in place.

No concern about your credit history.
Have you come across a loan broker’s website that makes these claims: “Bad credit okay!” or “Get a loan—guaranteed!”? If you have, watch out. Commercial loan brokers that say they can get you any loan with any credit score, even if it’s not too good, are lying. While there are absolutely loan options available for business owners with bad credit, your personal credit score is a huge factor of what kind of loan you can secure.

No business email address.
A  goodly number of so-called loan brokers advertising their services on social media today have email address at yahoo, gmail, and/or aol. Anyway can create an email account at one these providers and claim to be a loan broker. If you don’t see a company business name email address stay well clear.

Questions to Ask a Business Loan Broker

What Is The Total Cost of My Loan?
If the broker answers you with an amount, be it actual or a range, do not work with him. Since he is not the lender, he has no idea what the cost of the loan will be.

How Many Lenders Are You Shopping My Loan To?
While this strategy works well when buying residential real estate and automobiles shopping for a business loan is the best way to have you application declined. The correct answer, one which unless you work with The Web Lender, is never the truthful answer. At The Web Lender our answer is ‘we do not shop loans. We will submit your loan to a maximum of three funding sources, one at a time. If all three decline, you are not fundable’.

Do You Sell My Information?
Unfortunately you won’t get an honest answer to this question.

How Long Until I Receive Funding?
This is not a question for a broker since he is not the one funding your loan. If he answers you with a time do not work with him. The time to receive funding on every business finding deal is entirely up to the borrower. If a lender requires four documents and the borrower has only three, and has to create the fourth, this obviously delays the time to fund the deal.

Remember: They’re called brokers because more often than not, loan brokers break deals.

The Web Lender Portal is not a loan broker.

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