Four roles that can appear in one transaction
| Role | Primary function |
|---|---|
| Direct lender | Underwrites and originates a loan from its own program or balance sheet. |
| Broker or ISO | Collects information and seeks financing from one or more providers, often for compensation. |
| Marketplace | Uses a platform or network to present or route potential matches. |
| Receivables purchaser or finance company | Offers a commercial-finance structure that may not be a traditional loan. |
Questions to ask before applying
- Are you the funder, an arranger, a broker, a lead generator, or a marketplace?
- How many providers may receive my application and documents?
- How are you paid, and is that compensation included in my cost?
- Will multiple credit inquiries occur, and at what stage?
- Who will service the obligation and handle payment questions?
- Can I see the provider’s legal name before accepting an offer?
Control data sharing
Read the application consent and privacy notice. Determine whether information will go to a defined group of providers or can be resold more broadly. Use a business email address you control, keep a copy of every consent, and request a list of the parties that received the application when practical.
Compare written offers
Access to multiple providers can create useful options, but the number of offers is not a quality measure. Compare net proceeds, total repayment, payment schedule, collateral, guarantees, prepayment treatment, default terms, and the identity of the actual provider.
The FTC says its authority can reach lenders, finance providers, marketers, independent sales organizations, brokers, lead generators, servicers, and debt collectors. It also warns businesses about deceptive descriptions of funding amounts and obligations.
Primary sources
- FTC: Protecting small businesses seeking financing
- Federal Reserve: How small businesses obtain credit
General educational information only. This page is not a financing offer or legal, tax, or accounting advice. Actual products and terms depend on the applicant, provider, underwriting, and written agreement.