Ever wonder how your “helpful” business loan broker pays their bills? Spoiler: with your money.
Brokers love to call themselves “advisors” or “partners.” What they don’t love is talking about how they actually make money: commissions. And those commissions aren’t small — they can add tens of thousands of dollars to your cost of capital without you even realizing it.
Not All Loans, Just the Expensive Ones
Let’s get one thing clear: when I talk about broker commissions, I’m not talking about traditional bank loans or SBA loans.
Yes, brokers can and do broker those loans in the real world. But it’s rare — and here’s why:
- Commissions are tiny: SBA rules cap broker fees (typically 2–3% of the loan amount, with a hard ceiling of about 4% on loans under $50K and dropping closer to 1–2% as loan size increases). Compare that to the 8–12% (or more) brokers can quietly pocket on alternative funding, and it’s obvious where their focus is.
- They’re slow: Bank and SBA loans can take 30–90 days to close, with a mountain of paperwork. Brokers don’t want to wait that long to get paid.
- They’re harder to get approved: Banks and SBA lenders decline the majority of applicants. A broker can’t monetize a dead deal.
So where do brokers really make their money? Alternative business funding — the fast, high-cost working capital world:
- Merchant cash advances (MCAs)
- Revenue-based financing
- High-cost “working capital” term loans
- Fintech loans that look flexible but aren’t cheap
These funders are quick, they pay out commissions generously, and they don’t ask too many questions. And while a broker might brag about having a “wide variety” of funding sources, the truth is they know exactly where their bread is buttered.
How Broker Commissions Work
Here’s the dirty secret: when a lender offers a deal, they set a buy rate (the actual cost of the loan). The broker then marks it up to a higher sell rate. That difference? Straight into their pocket.
Typical broker commissions in alternative funding run 5–15% of the loan amount, but they’re almost never disclosed. They’re baked into your repayment terms, hidden behind jargon, and designed to make you feel like you got a “deal” while the broker laughs all the way to the bank.
A Real-Life Example
Let’s say you’re looking for a $200,000 loan.
- The lender gives your broker a buy rate of 1.20 over 12 months.
- The broker sells it to you at a 1.30 rate instead.
You — the borrower — never see that 1.20 buy rate. It’s a tidy secret between the broker and the lender. All you ever see is the 1.30, dressed up in paperwork that makes it look like the only option.
That means instead of paying back $240,000, you’re on the hook for $260,000.
On a weekly repayment schedule, that’s:
- Buy rate (1.20): about $4,615/week.
- Sell rate (1.30): about $5,000/week.
That’s nearly $20,000 in extra cost — all because your broker clipped the ticket.
And here’s the kicker: I’ve personally facilitated thousands of deals inside lenders and through broker channels. The number of times the actual buy rate or commission was disclosed to the borrower? I can count them on one or two hands. That’s how rare transparency is in this business.
Why It Matters
If you’re talking to a broker, it’s probably because you’ve bought into the myth that brokers “get lenders to compete for your business.”
And in a perverse way, that’s true. Lenders do compete — but not to win you a better deal. They compete to win the broker’s loyalty. How?
- By widening the spread between the buy rate and the sell rate, so the broker pockets a fatter commission.
- By approving a larger funding amount (sometimes more than your business can responsibly handle), because a bigger loan means a bigger commission check.
So while you think brokers are shopping for the best deal on your behalf, they’re really being courted by lenders dangling bigger payouts. You’re the product, not the client.
The Alternative
You don’t need a broker to access capital.
- Apply direct with fintech lenders.
- Cut out hidden commissions.
- Save yourself thousands (sometimes tens of thousands) in the process.
You’re not just getting cheaper money — you’re making yourself a better credit risk. Lenders like direct clients because lower payments = lower chance of default. Everyone wins… except the broker.
Final Thought
Brokers don’t get paid to say no. Even if more debt will choke your business, they’ll happily say yes and pocket their cut.
Would you trust a doctor who prescribes surgery every time? Or a lawyer who advises you to sue no matter what? Then why trust a broker whose answer is always “yes”?