Quick answer
A broker is a go-between who matches a borrower with a lender and handles much of the application, but doesn't lend money themselves. In Australian business lending, brokers are usually paid commission by the lender, sometimes plus a fee from the borrower. The legal best interests duty covers residential mortgage broking for consumers, so for business loans it pays to ask how a broker chooses lenders and gets paid.
Key points
- Brokers arrange finance; the lender makes the decision and provides the money
- Pay is usually lender commission, sometimes upfront plus trail, and occasionally a client fee
- The best interests duty in the National Credit Act targets consumer home lending
- A broker's panel limits what they can offer, so ask which lenders they actually use
A broker sits between you and the people with the money. They learn your situation, pick lenders likely to say yes, package the application and chase it through to settlement, but the loan itself always comes from someone else. Think of a broker as a guide who knows the terrain, not the owner of the land.
How a business finance broker works
Most brokers follow a similar path:
- Fact-find. They gather your financials, bank statements, ID, details of any property and the purpose of the loan.
- Shortlist. From the lenders on their panel, they choose the ones whose credit policies fit your profile.
- Submit and negotiate. They present the deal, answer the credit team’s questions and push for better terms where they can.
- Settle. They coordinate documents, valuations and solicitors until funds arrive.
Many brokers belong to an aggregator, a larger group that provides lender accreditation, software and compliance support. That’s how a small broking business gets access to dozens of lenders.
Who pays the broker?
Here’s the part worth understanding. In most business deals the lender pays the broker a commission, usually calculated on the amount borrowed and paid when the loan settles, and some lenders add a smaller ongoing trail. Some brokers also charge the borrower a fee, which is more common with private or urgent lending.
That arrangement is fine on its own terms. Brokers do real work and need paying. But commission structures differ between lenders, so ask plainly: “What will you earn from this loan, and from whom?” Our guide on how brokers get paid goes deeper.
What rules apply to business loan brokers?
The National Credit Act imposes a legal best interests duty on mortgage brokers, explained in ASIC’s Regulatory Guide 273. That duty is aimed at consumer credit: loans for personal or household purposes and residential investment property. A loan used mainly for business purposes generally falls outside it.
So with business finance, the quality of advice comes down more to the broker’s own standards. Many are excellent and hold a credit licence anyway because they also do home loans. Others work purely in commercial lending. Neither is wrong, but it changes what you should check. A mortgage broker who mostly writes home loans may also have less experience with cash flow lending, invoice finance or private credit.
Prefer to skip the shopping around? Our one-minute enquiry puts your file in front of a team that compares on your behalf.
Five questions to ask any broker
- How many lenders do you actually place business deals with, and which ones?
- How are you paid on this loan: commission, trail, a fee from me, or a mix?
- Have you placed deals like mine recently (my industry, credit history, security)?
- Will you tell me why you’ve recommended this lender over the others?
- Who will I deal with day to day, you or someone else in the office?
An Australian example
Raj owns a two-truck freight business in Geelong and was declined by his bank for an equipment upgrade because one year’s profit dipped. A broker who works with several equipment financiers places the deal with a lender that looks at recent bank statements rather than the weak tax return. The lender pays the broker’s commission at settlement, disclosed in a credit proposal Raj signed upfront. Raj could have approached that lender himself, but he wouldn’t have known it suited him.
Related terms
Compare the broker route with going direct in our broker vs direct lender page. See also lender and funder, and our step-by-step guide to working with a finance broker.
Want someone in your corner without the runaround?
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Frequently asked questions
Do I pay a business loan broker?
Often you don't pay directly, because the lender pays the broker a commission. Some brokers also charge the borrower a fee, especially for complex, urgent or private lending deals. Any fee should be disclosed in writing before you commit, and you can ask for the commission amount too.
Does a business loan broker need a licence?
Brokers arranging consumer credit, including home loans, need an Australian credit licence or must act as a credit representative of a licensee. Credit used mainly for business purposes sits largely outside that regime, so a broker who only arranges business loans may not hold one. You can search ASIC's professional registers to check.
Is a broker better than going straight to a lender?
It depends on your situation. If you fit a bank's criteria and already bank there, going direct can be simple and cheap. A good broker earns their keep when your case is unusual, when you've been declined, or when you need several lenders compared quickly.
What is a broker panel?
It's the list of lenders a broker is accredited with. A broker can only submit deals to lenders on that panel, so a narrow panel means narrow choice. Asking how many lenders they used last year, and which ones, tells you more than a claim of access to hundreds.
Can a broker guarantee approval?
No. Only the lender can approve a loan, after its own assessment. Be wary of anyone promising a guaranteed outcome or asking for large upfront fees before a lender has looked at your file.