Spoiler: If you’re working with a business loan broker right now, you might want to sit down for this.
Introduction: The $20,000 Question
Here’s a fun exercise. Ask your friendly local business loan broker:
“Hey, exactly how much will you get paid if I take this loan?”
Watch them squirm. Watch them mumble something about “the lender pays us,” “there’s no fee to you,” or my personal favorite: “Don’t worry about that.”
If you think brokers are transparent about their fees, I have a bridge to sell you. They live off the fact that most business owners never bother to ask. Or don’t know they should.
Let’s Be Clear: Brokers Don’t Work for Free
First, let’s get one thing straight:
✅ Brokers are salespeople.
✅ Their entire job is to get you funded.
✅ They only get paid when you sign.
And they get paid very well.
How? By adding their markup—sometimes tens of thousands of dollars—on top of the lender’s actual cost of capital.
Yes, you heard that right. You’re paying it. Even if they pretend you’re not.
The Magical “Free” Service (That Isn’t Free at All)
Your broker will tell you:
“It costs you nothing. The lender pays me.”
Which is technically true in the same way that saying your car dealer’s commission comes from the manufacturer is technically true.
✅ The lender does pay them.
✅ But that cost is built into your financing terms.
Higher rate? Shorter term? Big origination fee?
That’s the broker’s commission, baked in like arsenic in a cake.
The Broker Commission Game: How It Actually Works
Here’s how it really goes down:
1️⃣ Lenders set a buy rate.
Example: 1.15 factor rate on $100,000.
2️⃣ Broker sets a sell rate.
They convince you to take 1.30.
3️⃣ The difference is their commission.
In this case, 15 points = $15,000.
✔️ You pay 30% more.
✔️ Broker pockets the 15% spread.
✔️ Lender is happy—they got their 15%.
✔️ Broker is ecstatic.
You? You just overpaid by five figures.
The Worst Part? You Probably Don’t Even See It
Most brokers will never show you the lender’s real buy rate.
Why would they?
✅ The more opaque the deal, the fatter their commission.
✅ The more desperate you are for funding, the less you ask.
✅ The more urgent your need (“I need cash this week!”), the more they can squeeze you.
This isn’t “service.” It’s price-gouging for small businesses.
The “We Get You the Best Deal” Lie
Brokers love to say:
“We shop around to get you the best deal!”
Cute.
What they mean is:
✅ “We shop around to see which lender will give us the highest commission.”
✅ “We pick the funder with the biggest spread we can sell you.”
✅ “We’ll make them ‘compete’—for our commission.”
Your best interests? LOL. That’s not how their incentive works.
But Wait, It Gets Worse: Stacking
If you really want to see broker incentives in action, look at loan stacking.
✅ Broker got you funded once?
✅ You’re making payments?
✅ Cash flow is tight?
No problem—they’ll stack another loan right on top of the first.
✅ Higher risk.
✅ Even worse terms.
✅ Broker earns another fat commission.
And if it tanks your business? Well… that’s your problem. They already got paid.
“But My Broker Says They Don’t Charge Me Anything!”
Classic.
Here’s what they actually mean:
✅ You won’t see an invoice from them.
✅ The fees are built into the loan you take.
✅ The lender pays them out of your loan proceeds.
It’s like saying:
“I didn’t pay for the car dealer’s commission. Ford paid them.”
Sure, pal.
Except your monthly payment reflects it.
How Much Are We Talking?
Let’s be real:
✅ 8–12 points is common on standard deals.
✅ 15–20 points on higher-risk short-term loans.
✅ 25–35 points on second-position MCAs or desperate stacking deals.
On a $100,000 loan?
✅ That’s $8,000–$35,000 in hidden fees.
Think about what else you could do with that cash.
Why Don’t Lenders Stop This?
Another great question.
✅ They’d love to go direct.
✅ Brokers make their credit risk worse (the customer is overleveraged).
✅ They hate paying commissions that make them less competitive.
BUT…
✅ Lenders need deal flow.
✅ Brokers are the salesforce they don’t want to manage.
✅ Cutting brokers would shrink their origination pipeline overnight.
It’s a toxic but stable relationship—for now.
So, What Can You Do Instead?
⭐️ 1️⃣ Ask every broker to show you the lender’s buy rate.
If they can’t—or won’t—run.
⭐️ 2️⃣ Demand disclosure of their commission.
Spoiler: They’ll dodge this.
⭐️ 3️⃣ Compare direct lender offers.
Go to the source when you can.
⭐️ 4️⃣ Know your numbers.
If a broker says they’re “shopping for you,” ask:
- What’s the lender’s actual cost?
- What’s your markup?
- How much will this really cost me?
Or, You Know… Don’t Use a Broker At All
Wild idea, right?
Look, if brokers were transparent and capped commissions reasonably (2–3 points), I wouldn’t be writing this.
But they’re not.
✅ The incentives are broken.
✅ The markups are hidden.
✅ The result? You overpay.
And they know it.
Diogenes’ Advice (Because I’m Not Your Broker)
I’m not here to sell you a loan.
I’m here to save you from the people who are trying to.
✅ Use tools like Diogenes to evaluate your real options without broker markups.
✅ Ask the hard questions.
✅ Demand transparency.
✅ Don’t pay $20,000 in hidden commissions because you didn’t know better.
Final Word: Don’t Be the Easy Mark
Brokers bank on you being busy, distracted, and financially desperate.
They win when you don’t ask questions.
Ask.
Or better yet? Don’t even give them the chance.