Quick answer
Business loan brokers are usually paid in one or more of three ways: a commission from the lender when the loan settles, an ongoing trail from the lender, and a fee charged to you. Which mix applies changes which lender the broker is tempted to choose, so ask for every dollar they expect to receive, from whom, before you agree to proceed.
Key points
- Most brokers are paid by the lender on settlement, and some also charge the borrower a fee
- Trail commissions and clawbacks mean the broker's interests continue after settlement
- Commission differs between lenders and products, which can steer a recommendation
- Business-purpose loans sit outside the consumer credit rules, so disclosure depends on the contract and the broker
- You can simply ask for the full remuneration in writing, and a good broker will give it
The word “free” does a lot of work in broking. “Our service is free to you” is often true in the narrow sense that you do not pay the broker directly. It is never true that the broker works for nothing. Someone pays, and who that someone is affects what gets recommended.
None of this makes brokers a bad idea. A good one saves weeks and stops you from applying in the wrong place. It simply means the sensible move is to understand the money before you rely on the advice. Our guide on using a finance broker for a business loan covers the process. This one follows the money.
What are the ways a business loan broker is paid?
There are four common streams. A single broker may use one or several.
1. Upfront commission from the lender. When the loan settles, the lender pays the broker (or the broker’s aggregator) a commission. It is normally calculated on the amount lent and varies between lenders and products.
2. Trail commission from the lender. Some lenders pay a further amount over time while the loan remains active, usually based on the outstanding balance. Whether a trail exists at all depends on the lender and the product, so ask.
3. A fee charged to you. Brokers may charge an engagement fee, a success fee on settlement, or a flat fee for structuring complex deals. These can be on top of lender commission or instead of it.
4. Volume incentives and other benefits. Aggregators and lenders sometimes offer volume tiers or marketing support. These do not come out of your pocket directly, but they can shape which panel lender is at the top of the broker’s list.
Where does the aggregator fit?
Many brokers do not have contracts with each lender directly. They join an aggregator, which holds the lender relationships, processes applications and passes on a share of the commission. The broker’s share, and the aggregator’s share, are agreed between them. Our glossary explains the role of an aggregator.
Why does this matter to you? Because a broker’s panel is limited to the lenders their aggregator offers. A broker who says they search “the whole market” may mean “all the lenders on my panel”. Ask for the panel list.
What does a dollar example look like?
An illustration, with invented numbers, to show how the pieces combine.
A café group wants $400k secured on commercial property. A broker places it with a non-bank lender.
| Item | Paid by | Illustrative amount |
|---|---|---|
| Upfront commission | Lender, on settlement | $4,000 |
| Trail commission | Lender, while the loan runs | $500 a year |
| Broker’s fee to the client | Borrower | $2,000 |
| Lender’s establishment fee | Borrower | $4,000 |
Total to the broker over two years: $4,000 + $1,000 + $2,000 = $7,000. The borrower sees $6,000 of cost directly ($2,000 broker fee plus $4,000 lender fee) and pays the lender-funded commission indirectly through the loan’s price.
If another lender on the panel pays $2,000 upfront and no trail, and its price is slightly lower, the broker earns less by recommending it. A broker who tells you this and recommends it anyway is showing exactly the behaviour you want. A broker who says nothing leaves you guessing. That is why asking is useful.
What is a clawback and why does it matter?
If you repay or refinance early, the lender can reclaim some or all of the commission it paid. Clawback periods vary. The practical effect is that your broker has a financial reason to keep you in the loan, and a reason to be less enthusiastic if you ask about refinancing in the first year.
If you expect to refinance or sell a property soon, say so at the start. Good brokers will then favour lenders with short or no clawback periods, or will charge you a fee in place of commission so that early repayment does not hurt anyone.
Are business loan brokers regulated like mortgage brokers?
Not in the same way. ASIC’s guidance on commercial loan disputes notes that lenders that only provide commercial credit are not legally required to join AFCA, so you should check whether a particular firm is a member. The National Consumer Credit Protection Act is aimed at credit for personal, domestic or household purposes. A loan made wholly or predominantly for business purposes generally falls outside it, which means the best interests duty and the formal commission disclosure rules that apply to home loans do not automatically apply.
That is the legal position, and it is the reason to ask the questions yourself. Many commercial brokers voluntarily disclose commissions, hold licences, or belong to industry bodies with codes of conduct. We explain the legal split in business loans vs consumer loans.
You can still check the broker. ASIC’s registers show whether a broker or its company holds a credit licence or is an authorised representative, and ABN Lookup confirms the entity.
Which questions expose conflicts?
Put these to any broker before you agree to anything. Ask them in writing if you can.
- “Will you be paid by me, the lender, or both, and how much in dollars?”
- “Is there a trail, and does a clawback apply if I repay early?”
- “Which lenders are on your panel, and how many will you actually submit to?”
- “Is any lender on the panel related to you or your aggregator?”
- “Do I owe you a fee if I decide not to proceed after you have done work?”
- “If a cheaper option sits outside your panel, will you tell me?”
Short answers are fine. Evasive answers tell you something.
If you would like a person to compare your options without any of this uncertainty, you can send us a short summary of what you need. We read it and call you, and there is no credit check when you enquire.
When is it worth paying a fee?
Lender-paid commission is not the same as free. It is paid out of the lender’s margin, which can nudge the price up a little. A borrower-paid fee, by contrast, makes the cost visible and can align the broker with you.
Paying a fee tends to be worthwhile when:
- the deal is complex (multiple securities, trusts, a recent decline or ATO debt);
- you want the broker to be paid the same whichever lender wins;
- the loan is large enough that the fee is small next to potential savings.
It is harder to justify on a small, simple loan where you could apply directly in an afternoon. The comparison page on broker vs direct lender lays out when each wins.
What should you have in writing?
Whichever way you proceed, ask to see:
- the broker’s full name, ABN and any licence or authorised representative number;
- the fee agreement, covering amount, timing and refund conditions;
- a statement of expected commissions from the lender;
- the list of lenders to which they intend to submit;
- confirmation that no application will be lodged without your agreement.
Keep it with your loan records. If something goes wrong, see how to complain about a lender for the next steps, since the same escalation path applies to brokers who are AFCA members.
Want to know where your deal belongs before you pay anyone?
Many owners come to us before they decide on a broker at all. They want an honest read on whether their request is realistic and which type of lender fits. We can give you that, and the first step is a short form that takes about a minute. It does not touch your credit file, and we do not pass your details around a pile of lenders. A real person reads your answers and phones you. Please fill the form in accurately so that the first idea we raise is one that suits your situation.
Frequently asked questions
Do business loan brokers charge the borrower?
Some do, some don't. Many are paid wholly by the lender. Others charge a fee to the borrower on top of, or instead of, a lender commission, and some charge an upfront fee before anything is submitted. Ask which applies and get it in writing before you sign anything.
What is a trail commission?
It is an ongoing payment from the lender to the broker for as long as the loan stays on the books, usually calculated on the outstanding balance. Not every business lender pays trails, and the amount varies by product.
What is a clawback?
If a loan is repaid or refinanced early, a lender may take back some or all of the commission it paid the broker. That gives a broker a reason to keep the loan with the original lender, which is worth knowing if you expect to refinance.
Is a broker required to act in my best interests on a business loan?
The best interests duty sits in the consumer credit laws, which do not generally apply to loans made wholly or mainly for business purposes. Some brokers choose to follow similar standards, and many belong to industry bodies. Ask what standard the broker commits to and whether the broker is a member of AFCA or an industry body with a code of conduct.
Is it cheaper to go direct to the lender?
Not always. A lender-paid commission is built into the lender's economics, so the price you are offered is often the same direct or through a broker. A borrower-paid fee is the extra cost. Compare the total, including any fee, with what you could arrange yourself.