I really appreciated Admin’s recent post about people pretending to be what they’re not. “If you’re a broker, say you’re a broker!” I believe he said. I agree, but at same time my thought was: “Um, I’m proud to call myself a broker,” and I’ll tell you why:
Direct vs Indirect (Broker)
Part of the confusion comes from these two terms and what they mean. For some reason that has led to a belief that perhaps one is “better” than the other, when nothing could be further from the truth, they simply occupy different roles.
Reputable direct lenders do what they do very well. They have excellent financial products that help capitalize many good enterprises. Someone working at the “business-getting” level of a direct lender- i.e., the folks posting on this site- will, in their travels, encounter businesses they CAN’T fund, for whatever reason. A smart lender in this case, would of course have a resource to refer that client to- that’s basic networking. But for the direct lender, that’s pretty much the end of it, correct? (I’m going to gain the ire of many a direct lender- that’s ok, I realize I’m oversimplifying and I welcome a rebuttal by any good direct lender who wishes to take issue. It's ok, this town is big enough for the both of us.My point, ultimately is this:)
What does a broker do?
A good broker provides many legitimate resources for funding good projects and enterprises.
A good broker works to increase your chances of successfully funding your project or enterprise.
The second part is key. I'll explain:
What Every Lender/Investor Wished the Client Knew
You’re competing for their money. Period.
When you develop an idea and submit it to the funding arena, there are more deals than yours on their desk. This is as true for the direct lender as for anyone else. Many funding requests happen, many get turned down.
As a broker, I often find myself in the role of helping a client to understand what the missing pieces are in that case. Frequently I find that their business plan needs refinement to attract legitimate interest. Or perhaps their approach needs to be restructured so that their plan can be funded in stages. Sometimes a good broker will help the client prepare a strategy to increase his credit-worthiness and ability to acquire income-producing assets in the future.
A good broker may wear many hats to help a business reach it’s goals.
A good “Commercial Finance Consultant” - which I guess is my official title- will not only have resources for legitimate, competitively priced funding options, but will ALSO know how to roll up his sleeves and go to work.
The borrower should understand that a good broker may put them to work as well. Which is also ok – it's YOUR business you want funded, right? Part of a small business owners responsibility is to do the work to put himself in a position to succeed.
But at the same time, a good Commercial Finance Consultant (since I've rolled out the term) will help you with that.
I'm working with a gentleman who is looking to fund what could be some profitable real estate deals. He has many of the pieces in place, but not all. I think he'll get there. But his executive summary is terrible! So, what do you do – because let's be very, very real here- the executive summary is analogous to a resume for a job. You're applying for the position of “Spender of Your Money, Mr. Lender.” It's a basic step. Presentation matters. Yes, neatness counts.
So, I'll clean up his Executive Summary, he'll work on his part and we'll likely do business together.
It's fun to do.
Watch out for “brokers” who:
This is my advice:
Steer clear of ANYONE who asks upfront fees to process your funding request. While their may be some legitimate out-of-pocket costs for things like appraisals or credit reports, I’m not aware of a legitimate lender/investor who will ask for money in their pocket in order to go to work for you.
Ultimately, a “good broker” gets paid for one thing, and one thing only: Successfully funding deals.
Carefully assess the costs of any loan offer and don’t allow yourself to be pressured into signing something or agreeing to something that doesn’t make business sense. This is not to say that a relatively high-cost product isn’t appropriate- every case is different. I’m simply advising buyers to be wise and aware. If the capital and its cost will make you more money, then by all means, go forward. But if you get to the closing table and it’s not right? Walk away.
Our policy is: If it makes business sense to the client then we’d expect to move forward. And if it doesn’t, then why in the world would we ask them to?
Avoid any “lender” who responds to your funding request like this:
Example: Someone posts something like –
“Need funding for X number of Y type of property/project/whatever...”
Then follow multiple comments that have no relation whatsoever to the funding request posted! If this site is to succeed, then the people who participate as funding sources – direct, broker or whatever – have a responsibility to do the work, indeed the due diligence, to do good business. If someone isn't willing to at LEAST do the research to review the request, assess if it might be a good fit, learn about the borrow, get a phone number... What effort will they likely put into your project? They make a blind response to a request they haven't read? Unhelpful responses don't do anybody any good. Please stop, those of you who are doing that. The SFR buyer doesn't really care about your fresh cut BG's. It's almost to the point of content spam with some.
This site can and will be the standard for where good business people go to find good business funding. But it's going to depend, in large measure, on the quality of funding sources available from those of us on the finance side. Let's put an end to the debate. Let's all do what we all do best and refer the rest.
Network. Serve the client. Do it.
I’m Don Green, and I’m a “broker.”