The main difference is choice. A bank can only offer its own business loans, while a business loan broker can compare products from a panel of lenders, which may include banks, non-bank lenders and specialist financiers. A broker also helps prepare and present your application, then manages it through to settlement.
Neither option is automatically better: going direct can work well for a straightforward loan with a bank that already holds your accounts and knows your business. A broker tends to add more value when your situation is complex, you need speed across several lenders, or a bank has already said no.
What does a bank do when you apply direct?
When you apply direct, you deal with a business banker or relationship manager at one institution. They assess your application against that bank’s credit policy and offer the products it has. If your business fits the policy, this can be efficient, especially if the bank already has your transaction history.
The limitation is that the bank can’t compare itself against other lenders. If its policy doesn’t suit your industry, trading history, security or loan purpose, the answer may simply be no, or an offer on terms that don’t fit.
What does a business loan broker do?
A business loan broker works with you to understand the funding purpose, then compares lenders whose policy suits your situation. Typical work includes:
- clarifying what the money is for and the right type of facility
- reviewing your financials, bank statements and existing debts
- shortlisting lenders and explaining the trade-offs between offers
- preparing a clear application and answering lender questions
- coordinating approval, documents and settlement
For a detailed list of what to prepare before you ask for funding, see our business loan broker Sydney checklist. business.gov.au also outlines what lenders usually want when you apply for a business loan (business.gov.au).
Business loan broker vs bank: pros and cons
| Factor | Going direct to a bank | Using a business loan broker |
|---|---|---|
| Choice of lenders | One lender’s products only | Products from the broker’s lender panel |
| Existing relationship | Can help if the bank knows your accounts and history | The broker learns your business from scratch, but can present it to several lenders |
| Complex or non-standard cases | Limited to the bank’s own policy | Can look for lenders with policies that fit |
| Effort for you | You manage the application yourself | The broker handles much of the comparison and paperwork |
| How it’s paid for | Built into the bank’s pricing and fees | Usually lender commission, sometimes plus a broker fee |
| Advice on structure | Focused on the bank’s products | Can compare structures across lenders |
When does going direct make sense?
Going direct can be the sensible choice when:
- Your bank already holds your business accounts and has a good view of your cash flow.
- The loan is simple, such as a modest equipment or overdraft facility that fits standard policy.
- You have already compared rates and fees and the bank’s offer is competitive.
- You value one point of contact for both banking and lending.
Even then, it is worth checking the total cost against at least one alternative before you accept. Our guide to business loan interest rates in Australia explains how to compare offers beyond the headline rate.
When is a broker more useful?
A broker tends to help most when:
- your trading history is short or your income is irregular
- your industry is one that some lenders avoid
- you need a specific facility, such as invoice finance or asset finance, that your bank doesn’t offer well
- you have been declined and want to understand why
- you are short on time and want several lenders compared at once
How are business loan brokers paid?
Many brokers are paid a commission by the lender when a loan settles. Depending on the product, this may be an upfront amount and in some cases an ongoing trail. Some brokers also charge you a fee for business lending, particularly for complex or larger deals. Arrangements differ between brokers and products, so ask for the full picture in writing before you proceed.
For consumer credit, licensed brokers must give you a credit guide that explains how they are paid. For business loans, it is reasonable to ask for the same information, including any commission the broker would receive from the lender you are recommended.
Does the best interests duty apply to business loans?
Precision matters here. The National Consumer Credit Protection Act 2009 requires mortgage brokers to act in the best interests of consumers when they provide credit assistance for home loans (legislation.gov.au). Moneysmart explains what to expect when you use a mortgage broker for a home loan (Moneysmart).
Credit that is mainly for business purposes generally falls outside the consumer credit regime, including the responsible lending obligations ASIC oversees (ASIC). That means the formal best interests duty doesn’t usually apply to a business loan. It doesn’t mean a broker can act carelessly, but it does mean you should ask directly how they will choose and recommend options.
Which questions should you ask a broker or bank?
Before you commit to either path, ask:
- How many lenders will you compare for my loan, and which ones?
- How are you paid on this loan, and will I pay any fee?
- Why do you recommend this lender and structure over the alternatives?
- What is the total cost, including establishment, ongoing and early exit fees?
- What security or personal guarantees will be required?
- How long does approval usually take, and what could slow it down?
For a broader set of questions on choosing a broker, see our broker vs bank guide, which covers the same decision for home loans.
How do you decide between a broker and a bank?
- Define the funding need. Know the amount, purpose and timing.
- Get your documents in order. Financials, BAS, bank statements and a list of current debts.
- Ask your bank for an indicative offer. Note the rate, fees, term and security.
- Speak to a broker. Ask how many lenders they will compare and how they are paid.
- Compare in writing. Look at total cost, flexibility and conditions, not just the rate.
- Choose and apply. Go with the option that fits your business best.
If you want to compare lender options for working capital, equipment or growth funding, visit our business loans page or start an enquiry.