Business finance brokers explained: how do they work and why should I use one?

A business finance broker (also known as a commercial finance broker) is a professional intermediary who helps businesses source and secure funding. Unlike direct lenders, brokers work independently on behalf of your business, accessing a panel of finance providers to offer you a range of options tailored to your specific needs.

Rather than being tied to one lender’s products, brokers have in-depth knowledge of the entire UK finance market which includes business loans, alternative finance and niche products you might not even know exist. Their job is to understand your business, identify suitable funding solutions and match you with the lenders most likely to say yes.

The old days of going to your bank are coming to an end: bank branches are closing across the country, the traditional bank manager who knew your business has largely disappeared and the market is now so complex that the specialist knowledge of business finance brokers is now a game changer.

For more information about business finance brokers, check out this article from the British Business Bank:
https://www.british-business-bank.co.uk/business-guidance/guidance-articles/business-essentials/what-is-a-commercial-finance-broker

The process of working with a business finance broker typically follows these steps:

1. Initial consultation
Your broker will take time to understand your business, your financial situation and what you’re looking to achieve. Whether you need working capital, equipment finance, or funding for expansion, they’ll assess your requirements and determine if borrowing is the right solution.

2. Market research
Using their extensive network of lenders, your broker will identify which finance products and providers best match your needs. As well as high street banks and specialist lenders, they may have access to alternative finance providers that only work through brokers.

3. Application preparation
Brokers will help you compile and present your application in a way that highlights your strengths and improves your likelihood of approval. This includes structuring your business case, organizing financial documentation and addressing any potential concerns upfront.

4. Negotiating terms
Thanks to their established relationships with lenders, brokers can often negotiate better rates or more flexible terms than you’d secure on your own. They understand the market, know what’s competitive and can leverage their connections to your advantage.

5. Managing the process
From application to funding, your broker liaises with all parties involved, ensuring deadlines are met and the process runs smoothly. They handle the admin burden so you can focus on running your business.

6. Ongoing support
Good brokers maintain relationships with clients after the funds have arrived, offering continued advice and support as your business grows and your funding needs evolve.

Business finance brokers in the UK can assist with virtually every type of commercial funding, including:

• Business loans, both secured and unsecured loans for various purposes
• Commercial mortgages, to finance purchase or refinance commercial property
• Asset finance, funding for equipment, vehicles and machinery
• Invoice finance, including factoring and invoice discounting to improve cash flow
• Working capital loans, short-term funding for day-to-day operations
• Development finance, funding for property development projects
• Trade finance, to support for import/export activities
• Bridging loans, which are short-term financing to bridge funding gaps
• Government-backed schemes such as Start Up Loans or British Business Bank initiatives

The breadth of options available through brokers is particularly valuable. Many specialist lenders only work through brokers, especially if they offer export finance or R&D tax relief. This means you won’t find these products by going directly to banks.

This varies depending on the broker and the type of finance you’re seeking.

Many business finance brokers in the UK operate on a commission-only basis, meaning you don’t pay them directly. Instead, they receive payment from the lender once your finance is arranged. This “no upfront fee” model is particularly common for products such as business loans, invoice finance and asset finance.

The brokers who do charge client fees are typically those who offer more complex or bespoke funding arrangements such as large commercial mortgages or development finance. Expect these fees to range from 1% to 5% of the loan amount, depending on the deal’s size and complexity.

For example, if you’re borrowing £100,000 and your broker charges a 2% fee, you’d pay £2,000. This might be payable upfront, added to your loan, or deducted from the funds released to you.

Transparency is key: reputable brokers will always disclose their fee structure clearly before you proceed, explaining exactly how they’re paid and whether there are any costs to you. If a broker is vague about fees or reluctant to put them in writing, consider that a red flag.

The most common payment method is a procuration fee (or “proc fee”) paid by the lender when a deal completes. This is a commission based on the loan value, typically ranging from 0.5% to 2% depending on the product type and lender.

For example, on a £500,000 commercial mortgage, a lender might pay the broker a proc fee of 1%, which equals £5,000. Importantly, this doesn’t increase the cost to you, it’s how lenders compensate brokers for bringing them business.

Different lenders pay different commission rates, which is why it’s crucial to work with an independent broker who has standard commission terms across their panel. This ensures they’re recommending lenders based on what’s best for you, not what pays them the most.

Some brokers also charge a fee directly to clients, particularly on larger or more complex deals. As mentioned above, these typically range from 1% to 5% of the facility amount.

On a £500,000 commercial mortgage where both models apply, the total fees might break down as:

• Total gross fee: £10,000 (2%)
• Proc fee from lender: £5,000 (1%)
• Broker fee from client: £5,000 (1%)

While rates vary by lender and deal specifics, here are typical commission ranges:

• Commercial mortgages: 0.5% to 1.5% of loan value
• Business loans: 1% to 3% of loan value
• Asset finance: 2% to 5% of asset value
• Invoice finance: Variable, often ongoing commission based on facility usage
• Bridging loans: 1% to 2% of loan value
• Development finance: 1% to 2% of loan value

Recent data shows that members of the National Association of Commercial Finance Brokers (NACFB) originated an estimated £27 billion of commercial lending in 2024, with an average deal value of £250,000. Recent and up to date statistics can be found on the NACFB home page: https://nacfb.org/

While not all commercial finance activities are regulated by the Financial Conduct Authority (FCA), many are. Check if your broker is FCA-authorized or an appointed representative of an authorized firm. You can verify this on the FCA register.

Additionally, look for membership in professional bodies like the National Association of Commercial Finance Brokers (NACFB). Members must adhere to strict professional standards and codes of conduct.

At Swoop, we take the guesswork out of business finance. Our platform connects UK businesses with the right funding solutions quickly and efficiently at no cost to you.

What makes Swoop different:

• Whole-of-market access: We work with over 200 lenders, including banks, alternative finance providers and specialist lenders
• No upfront fees: Our service is completely free for businesses. We are only paid by lenders when you secure funding
• Expert guidance: Our experienced team provides impartial advice tailored to your specific business needs
• Fast and efficient: Our digital platform speeds up the process, so you can access funds when you need them
• Ongoing support: We’re here to help not just with this funding need, but as your business grows and evolves

Whether you need a business loan, invoice finance, asset finance, or another funding solution, we can help you explore your options and connect with the right lenders.