Commercial Finance Broker: 10 Questions to Ask Before You Choose

The best way to choose a commercial finance broker is to test how they would run your deal before you sign anything: which lenders they would approach and why, how they would present your business, how they are paid, and who will manage the process to completion. A good broker answers those questions specifically and in writing. A weak one talks about access and speed and stays vague on everything else.

This guide is for owners, finance directors and their advisers at established UK businesses raising £200k or more, whether that is a term loan, an asset based lending facility, acquisition finance or a commercial mortgage. At that size the broker's job is less about finding a lender and more about structuring the debt and running a competitive process, so the questions you ask should reflect that.

Key facts

• A commercial finance broker introduces a business to lenders and helps it secure a facility. A debt adviser goes further, setting the right debt structure and running the process end to end. The best brokers do both.
• Lenders size debt against profit, assets or property. Senior term loans go up to 4x EBITDA, acquisition finance up to 5x EBITDA, and asset based lending advances up to 90% against receivables.
• Whole-of-market access matters less than lender selection. Sending your deal to the wrong lenders wastes time and can leave a record of declines.
• The credit paper your broker writes is often the first thing a credit committee reads. Its quality shapes the terms you are offered.
• You can check whether a firm is authorised by the FCA, or is an appointed representative of a firm that is, on the FCA Register.
• All finance is subject to status and lender approval. No broker can promise an outcome, so treat any such promise as a warning sign.

What a commercial finance broker actually does

At the smaller end of the market, a broker's role is mostly matching: take an application, pass it to a few lenders and return the best quote. For facilities from £200k upwards, the work is different. Lenders want to understand the business, the purpose of the borrowing, how it will be repaid and what happens if trading dips. The broker's job is to answer those questions before a lender asks them.

In practice that means four things:

1. Setting debt capacity. Working out how much the business can sensibly borrow against its earnings, assets and property, and how much headroom to leave. Our guide to how much your business can borrow explains how lenders approach this.
2. Choosing the structure. Deciding whether the need is best met by a term loan, a revolving facility, asset based lending, a commercial mortgage or a combination of these.
3. Running the process. Writing the credit paper, approaching the lenders best suited to the deal, handling their questions and comparing offers on a like-for-like basis.
4. Managing to completion. Negotiating terms, working with lawyers and valuers, and clearing conditions precedent through to drawdown.

If a broker only describes the third step, you are buying an introduction service. That can be fine for a simple deal, but it is not the same as advice on structure.

10 questions to ask a commercial finance broker

1. Which lenders would you approach for my deal, and why?

"We have access to hundreds of lenders" is not an answer. Ask for a shortlist of the types of lender they would approach for your deal and the reasoning behind each. A good broker will explain which lenders like your sector, deal size and security, and which would be a poor fit.

2. Do you cover the whole market, or work from a panel?

Some brokers work with a limited panel or have close ties with a handful of lenders. If the same two or three names come up for every deal, ask why.

3. How will you present my business to lenders?

Ask to see an anonymised example of a credit paper or information memorandum. This document sets out the business, management, financial performance, the use of funds, repayment capacity and the risks with mitigants. Credit committees read a lot of these, and a well-argued paper that anticipates their questions can improve both the outcome and the terms.

4. Have you arranged deals like mine before?

Sector and deal type matter. Funding a management buyout is different from refinancing a property portfolio or putting an asset based facility in place for a manufacturer. Ask what similar deals the broker has worked on, how they were structured and what the main credit issues were. If you work in a specialist sector, look for knowledge of the lenders that understand it. Our industries pages show how lenders look at different sectors.

5. Is my deal the right size for you?

A broker that mostly arranges small unsecured loans may not have the lender relationships or the experience for a multi-million pound acquisition, and the reverse can also be true. Ask what range of facility sizes they typically arrange and where your deal sits within it.

6. Who will actually work on my deal?

At some firms a senior person wins the mandate and a junior team runs it. Ask who will write the credit paper, who will speak to lenders and who will be your day-to-day contact through to completion.

7. How are you paid, and what will it cost me?

Ask for the full fee basis in writing before you engage: any upfront or success fee, when it is payable, and what happens if you do not proceed. Read the terms of business carefully, including any exclusivity period and whether a fee could be due if you later take a facility from a lender the broker introduced.

8. Are you authorised, and by whom?

Check the firm on the FCA Register. Some brokers are authorised in their own right and others are appointed representatives of an authorised firm, in which case the principal firm should be named. Not every commercial lending product is regulated, but checking the Register tells you who you are dealing with.

9. How will you compare the offers?

The cheapest headline margin is not always the best deal. Ask how the broker will compare arrangement and exit fees, covenants, security and personal guarantees, prepayment terms, and for asset based facilities the availability you can actually draw. A good broker will lay offers out side by side and explain the trade-offs.

10. What happens after terms are agreed?

A signed term sheet is not funding. Due diligence, legal documents, valuations and conditions precedent can all slow a deal down. Ask how the broker manages that stage and how they keep you informed.

Good answers and red flags

Common mistakes when choosing a broker

Using several brokers at once

It can feel like a way to widen the search, but it usually narrows it. Lenders notice when the same deal arrives from different sources, and it can look as though the business is struggling to raise. One well-run process is stronger.

Approaching lenders before the story is ready

A lender's first impression is hard to change. If the numbers are not reconciled, add-backs are not evidenced or the forecast is not credible, a decline can follow you. Get the credit paper right first.

Choosing on speed alone

Speed matters when there is a deadline, such as a share purchase or an auction completion. But the fastest route is rarely the best structure, and no responsible broker can promise a timescale before lenders have done their work.

Ignoring the existing bank

Your current lender may be part of the answer. A good broker will consider whether an improved offer from your bank, alongside other lenders for part of the facility, gives a better overall result.

How much a good broker can help you raise

The amount depends on your business, not the broker, but structure makes a real difference. Lenders give full credit for the thing they understand best. A term loan lender looks at earnings, with senior debt up to 4x EBITDA. An asset based lender looks at the balance sheet, advancing up to 90% against receivables and up to 85% of the net orderly liquidation value of plant and machinery. A commercial mortgage lender looks at property, up to 75% loan to value. Combining these can raise more than any single lender would offer on its own. Our business loans guide explains how these facilities fit together.

How GBF helps

We are a commercial finance broker and debt adviser arranging facilities from £200k to £100m. We start by understanding the business and what the funding is for, then write a credit paper and approach the lenders best suited to the deal from a whole-of-market panel of 650+ lenders. We compare and negotiate the terms with you and manage the deal through to completion. We have arranged £165m+ of funding for UK businesses. You can read more about us or see how our debt advisory service works for owner-managed SMEs.

FAQs

What is the difference between a commercial finance broker and a debt adviser?

A broker introduces a business to lenders and helps it secure a facility. A debt adviser sets the right amount and structure of debt and runs a competitive process across lenders. For larger or more complex deals, you want both skills in one firm.

Is it worth using a broker if I already bank with a high street lender?

Often, yes. Your bank sees one view of your business and offers its own products. A broker can test that offer against the wider market and, where it helps, combine lenders so each funds the part it understands best. Sometimes the result is better terms from your existing bank.

Will using a broker affect my credit record?

That depends on how the broker works. A well-run process approaches only the lenders likely to support the deal, which limits unnecessary applications. Ask the broker when, and by whom, any credit search would be carried out.

What information will a broker need from me?

Usually the last two to three years of filed accounts, current management accounts, a forecast, an aged debtor and creditor list, details of existing borrowing and an explanation of what the funding is for. For property or asset based deals, details of the property or assets as well.

Can a broker promise I will get funding?

No. All finance is subject to status and lender approval. A good broker improves your chances by choosing the right lenders and presenting the deal well, but the credit decision belongs to the lender.

If you are planning a raise of £200k or more and want to know where you stand, check what you could raise or call us on 020 3432 2341.

Sources

• FCA Register

Tom Renshaw

Founder and Managing Director, Growth Business Finance

Tom arranges business loans, asset based lending and property finance for UK SMEs and mid-market companies. More about GBF