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You are thinking about using a business loan broker, and one question keeps coming up: what is this going to cost me? It is a fair thing to ask, and the answer is not the same everywhere. This guide explains in plain words how brokers get paid, which fees to watch for, who pays them, and what to ask before you sign anything. The short version: whether business loan brokers charge fees in Canada depends on the broker, so always ask before you agree to anything.
What is a business loan broker, in plain words?
A business loan broker is a go-between. A broker does not lend its own money. Instead, it listens to what your business needs, compares options from several lenders, and sends your request to the ones that may fit.
A marketplace works much the same way, usually through a website. Think of a travel agent. The agent does not own the plane, but can compare flights for you so you do not have to call every airline.
Want the longer version? Read our guide on business financing brokers vs. direct lenders.
Do business loan brokers charge fees in Canada?
Some do and some do not. Brokers are paid in different ways, and how a broker is paid is the most important thing to ask about. In many cases the lender pays the broker when a loan is completed. Other brokers ask the business owner to pay them directly. A few are paid from both sides.
Nobody can tell you the answer for every broker, which is why the questions later in this guide matter so much.
How do brokers actually get paid?
Here are the most common ways. Any one broker may use one of these or a mix.
- The lender pays the broker. When your loan is completed, the lender pays the broker for bringing the business. You do not write a cheque to the broker. The cost of doing business is still part of the lender's side of the deal, so always compare the total you will repay on each offer.
- You pay a fee before the work starts. Some brokers ask for money up front. Be careful here. Ask what exactly you are paying for, and whether you get it back if no loan happens.
- You pay a fee only if you get funded. This fee may be taken out of the money you receive or billed afterward. Ask to see it written down.
- You pay a monthly or yearly amount for ongoing advice. This is more like hiring a consultant than using a broker.
- Both sides pay. This can be fine when it is clearly explained in writing. It is not fine when you only find out later.
Who pays whom? A simple picture
It helps to see the order of events. Here is how it usually goes when the lender pays the broker:
- You tell the broker what your business needs and why.
- The broker shares your request with lenders that may fit.
- One or more lenders send back offers.
- You pick an offer, or you say no to all of them.
- If you accept and the loan is completed, the lender pays the broker.
Example only: A small bakery wants to buy a bigger oven. The owner asks a broker for help. The broker sends the request to several lenders, and two make offers. The owner chooses one. Because the lender pays the broker, the owner never receives a bill from the broker. Another broker might have set it up differently, with a fee billed to the owner. Your situation will be different.
How does lendflo get paid?
lendflo is a broker, and it is free for business owners to use. lendflo is paid by the lender when a loan is completed, and does not charge the business owner a fee. You can look at your options and walk away without paying lendflo anything.
We still suggest you do the same checks with us as with anyone else. Ask how any broker is paid, and compare the total you will repay on every offer. You can see how lendflo works or read our answers on the questions page.
Does using a broker make a loan cost more?
Not automatically. When the lender pays the broker, you are not billed separately. When a broker adds a fee on top, it may cost more than going direct.
You cannot tell from the outside, so look at the full offer. Two offers can look similar and still cost very different amounts once every fee is added up. Our guides on comparing business loan offers and APR vs. interest rate vs. fees show you how.
Questions to ask any broker before you sign
Copy this list. It works for a broker, a marketplace, a bank or a lender.
- How are you paid? By the lender, by me, or by both?
- Will I ever pay you a fee? If yes, when, how much, and for what?
- Is any fee refundable if no loan happens?
- Which lenders do you work with, and do you show me every offer or only some?
- What is the total I will repay on each offer, written down?
- What happens if I repay early or miss a payment?
- Who will I deal with after the loan is completed?
A good broker answers these plainly and in writing. If the answers are vague, that tells you something too.
Warning signs to look for
Most brokers are honest. A few are not. Be careful if anyone:
- Asks for money before you have seen any written agreement
- Promises you will be approved before looking at your business
- Pushes you to decide today
- Will not tell you how they are paid
- Will not name the lenders they work with
We cover these and more in our guide on how to spot a business loan scam.
When going direct to a lender may be enough
A broker is not always needed. If you already know the lender you want, have a good relationship with your bank, and only need to compare one or two options, applying directly can be simple.
A broker tends to help most when you want to see several options at once, when you were turned down elsewhere (see what to do after a bank says no), or when your situation is a little unusual.
Common mistakes to avoid
- Not asking how the broker is paid. It is the first question, and the most skipped.
- Paying a fee up front without a written agreement.
- Comparing only the interest cost. Look at the full amount you will repay.
- Using one broker only. You are free to speak with more than one.
- Signing the same day because someone pressured you.
Ready for the next step?
If you would like to see what could fit your business without a fee to you, you can book a short call with our team. It takes a few minutes. You can also read about how a business line of credit works or learn about alternative business financing.
This post is general information to help you understand your options. It is not personal financial, legal or tax advice. Details, rates and rules can change, so check the latest information before you decide.
