Business finance brokers: how they get paid and when to use one

Finding the right funding for your business can be time-consuming and complex. That's where business finance brokers step in: they find lenders for your company, compare what's available, and arrange the loan. Whether you need one comes down to how unusual your borrowing is. If your requirement is complicated, your credit history is patchy, or you need to compare secured products across a market you can't see from the outside, a good broker earns their fee. If you want a straightforward unsecured loan and your accounts are in order, you can apply to lenders yourself.

We're a direct lender, so we have an obvious interest in that second answer. Which is why the rest of this page is about how brokers get paid, and what that means for what you're shown.

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What a business finance broker does

A business finance broker connects businesses with lenders, using relationships that range from high street banks to specialist and alternative funders. Brokers consider an average of six lenders per deal, according to the British Business Bank's Small Business Finance Markets report published in March 2026.

Here's what they do:

• Assess your needs. A broker works out what you're trying to fund, over what period, and what your business can support.
• Compare options. They search the market on interest rates, repayment terms, and flexibility.
• Manage the process. From paperwork to negotiating terms, a broker runs the application for you.

That last one is worth more than it sounds. Packaging an application well, for the right lender, is most of what a broker is actually selling.

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When a broker is worth paying for

Brokers are popular for a reason. Many business owners find looking for a loan complex and intimidating, and there's real value in knowing someone is in your corner. There are three situations where that value is easy to put a number on.

Your requirement is complex or unusual. Property-led deals, refinancing an existing facility, funding an acquisition, or anything that needs more than one product stacked together. These are the cases where lenders price case by case, and where someone who places this kind of deal every week will know which three funders to approach and which twelve to skip.

You've been turned down before. This is the clearest evidence in favour of brokers, and it's worth stating plainly: 26% of the small businesses that brokers helped had been declined elsewhere before they approached a broker. That figure is from the British Business Bank's March 2026 report, drawing on the National Association of Commercial Finance Brokers' own survey of its members. A broker who knows which lenders will look past a late filing or a thin trading record can turn a no into a yes.

You need to compare products you can't see. Some specialist lenders work only through brokers and don't take direct applications at all. If you need secured lending, invoice finance, or asset-backed funding, a broker can reach parts of the market that aren't open to you directly. We don't offer secured or property finance, so this is a genuine gap a broker fills.

One honest note on the third point. In the same survey, 23% of brokers said their clients ended up with a different product from the one they originally asked for. Often that's the broker doing their job and finding a better fit. Sometimes it isn't. It's worth asking why, if it happens to you.

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When you probably don't need one

If you want an unsecured loan for working capital, you know roughly how much you need, your accounts and filings are up to date, and you're not in a hurry to be talked into something else, going direct is simpler. You deal with the person making the decision, and there's no third party in the middle of the conversation.

Plenty of lenders, including us, take applications directly online. It's worth spending half an hour on the main types of business finance first, so you know what you're asking for.

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What kinds of finance a broker can reach

Brokers cover a wider range of products than most single lenders, which is part of the point of using one. The usual list:

• Unsecured loans – borrowing without putting up an asset as security.
• Secured loans – lower rates, backed by property or other assets.
• Invoice finance – releasing cash tied up in unpaid invoices.
• Asset finance – funding equipment and vehicles.
• Merchant cash advances – repaid as a share of your card takings.

If you're weighing up the whole market rather than one product, our guide to alternative business funding covers the options in more detail. And if it's specifically invoice finance you're after, we have a separate page on invoice finance brokers.

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How business finance brokers get paid

This is the question that gets answered least clearly, usually because the answer is on the broker's own website.

The British Business Bank sets it out in a guide written with the National Association of Commercial Finance Brokers, published in March 2025. There are four models:

• Some brokers charge you an upfront fee and receive nothing from the lender.
• Some charge you a fee and receive a fee from the lender. The guide notes this 'often happens if you have complex circumstances and/or borrowing requirements'.
• Some charge you nothing, and are paid by the lender instead, either a flat amount or a percentage of what you borrow.
• Some charge an agreed percentage of the borrowing, or of the proceeds if a business is being sold.

The third is the most common arrangement, and it's the one that gets described as 'free'. It isn't free. It means the cost sits somewhere you can't see rather than on an invoice addressed to you.

How much? Nobody independent publishes a figure. We looked: the British Business Bank's 161-page market report doesn't contain the word 'commission' once, despite a six-page chapter on broker finance, and neither the NACFB nor the FCA publishes a typical range. The percentages you'll find online come from brokers' own pricing pages. So rather than repeat a number we can't stand behind, the useful thing to say is that you can ask, and you should.

Under the NACFB's membership standards, a member must tell you the amount of commission if you ask, and must tell you up front if it's charging you a fee as well as taking one from the lender. That's a membership standard dating from 2019, though, not a legal requirement, and nobody at the FCA will enforce it for you. More on that below.

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Why what a broker earns can change what you're shown

It can, and the FCA has said so in writing.

In a 2018 thematic review of credit broking that specifically covered commercial finance brokers, the regulator wrote that in the commercial finance market 'commission earned by brokers may be dependent on the interest rate charged to the customer', using what the industry calls an increasing difference in charges model. The FCA's own summary of what that means: 'the more interest the customer is charged, the more commission the broker will earn.'

That is the regulator describing a structure that existed in our market, in its own words.

The same review found the other half of the picture, and it would be dishonest to leave it out. The FCA concluded that the suitability of the product 'appears to be the main factor influencing the information presented' to customers, and that the level of commission 'generally appears to play little, or no, part'. It also said it saw no evidence that customers were being shown significantly worse products than they could get elsewhere. That review is from 2018, so treat both findings as a picture of that time.

In September 2026, the FCA published a feedback statement on small business access to finance. In it, it recorded that stakeholders had raised concerns that 'limited transparency and commission-based incentives for unregulated brokers may, in some cases, steer micro-SMEs towards high-cost, short-term products that are not well suited to their needs'. The FCA was reporting other people's concerns rather than making a finding, and it added that 'this lending generally falls outside our perimeter' before passing the point to government. But a regulator writing that sentence in 2026 tells you the question hasn't gone away.

The NACFB's own rules push the other way. Members must be able to show that the commission structures they work under 'do not influence the recommendations which are made to the customer', and that their advice is 'impartial and objective'. Most brokers we deal with take that seriously.

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Where applications actually end up

We survey UK finance brokers every quarter for our SME Expert Index, a panel who between them submit thousands of small business finance applications a month. So we can tell you where brokers say they send things.

In our Q1 2025 wave, 67% of brokers said they recommend alternative lenders for loan applications over £100,000, against 6% who recommend high street banks. By our Q2 2026 wave, 75% agreed that high street banks are reducing their appetite for funding SMEs.

We should be straight about this: we are an alternative lender, so that finding flatters us, and you should weigh it accordingly. What it tells you regardless is that a broker's panel matters enormously above about £100,000, because that's where the market genuinely splits and where knowing the lenders is worth paying for. Below it, the choice is wider and more of it is open to you directly.

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What protection you have, and what you don't

Here is the thing most articles on this subject get wrong in both directions.

A loan to your limited company isn't a consumer credit agreement at all. Not an exempt one, not a regulated one. The rules define a credit agreement as one made with 'an individual or relevant recipient of credit', and a relevant recipient of credit means certain small partnerships and unincorporated bodies. A limited company is neither, so the whole regime passes it by, whatever the amount and whatever the purpose.

The FCA puts it plainly. In that September 2026 statement it explained that its work covered lending of £25,000 or less to sole traders and small partnerships 'but not to limited companies', and gave the example: 'a £20,000 business loan to a sole trader may fall within the consumer credit regulatory perimeter, whereas the same loan to a limited company would not.'

Three consequences follow, and they're the ones to know:

• There is no rule requiring a broker to tell your company what it is paid. The FCA's commission disclosure rules apply only to regulated credit agreements, so they don't reach your deal.
• Introducing your limited company to a lender isn't a regulated activity. In its 2026 statement the FCA calls these firms 'unregulated brokers'. A broker can be entirely unauthorised and perfectly within the law.
• The motor finance redress scheme doesn't help you. The 2025 Supreme Court ruling turned on a provision of the Consumer Credit Act that applies to individuals, and bodies corporate are excluded from it. The FCA's redress scheme covers consumer motor finance agreements. Neither reaches a company loan.

Compare that with buying business insurance. An insurance broker must, if a commercial customer asks, tell them the commission it's earning, in cash terms and in writing. That's a rule in the FCA's own handbook. So a company insuring a van has a rulebook right to know what its broker makes, and the same company taking out a six-figure business loan does not. There's no principled reason for the gap. It's just how the rules landed.

Now the part most articles get wrong the other way: you probably can still go to the Financial Ombudsman. The common claim that limited companies are shut out is false. The Ombudsman says it helps 'micro-enterprises and small businesses (including self-employed people, partnerships and limited companies)', and the thresholds are generous:

• A micro-enterprise employs fewer than 10 people and has turnover or a balance sheet of no more than €2 million.
• A small business isn't a micro-enterprise, has turnover under £6.5 million, and either a balance sheet under £5 million or fewer than 50 employees.

Small businesses can complain about things that happened on or after 1 April 2019. The Ombudsman reckons about 99% of UK small businesses are eligible, and its rules bring 'lending money' into scope whether or not the lending itself was regulated.

The catch is who you're complaining about. The firm has to be FCA-authorised. If your broker holds no authorisation at all, there's no Ombudsman route against them, which is the single strongest practical reason to check before you engage one.

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What to ask a broker before you engage them

Most of this takes one email, and the answers tell you a great deal. Ask these before you hand over your accounts.

1. Are you paid by the lender, by me, or both – and does what you're paid vary between the lenders on your panel? One question, and it's the one that matters. The variation is the part that affects you.
2. What's the amount? You have no legal right to it, but a member of the NACFB signs up to tell you on request, and a broker who won't answer has told you something anyway.
3. How many lenders will you approach, and are you tied to a panel? Six per deal is the market average. Ask which six.
4. Will anyone run a hard credit search before I've agreed to a specific offer? Multiple hard searches in a short window sit on your company's file and make the next lender more cautious. Insist on soft searches until you've picked a deal.
5. If I pay you a fee and the deal doesn't complete, what happens to it? Be wary of a substantial non-refundable fee charged simply to look at your case.
6. Does your agreement tie my company to you exclusively, and for how long? Some terms of business claim a fee even if you end up funding through your own bank.

Then check two things yourself.

The FCA register. Look the firm up on the Financial Services Register and read the permissions, not just whether it appears. A commercial broker often holds consumer credit permissions because part of its book is regulated, and that authorisation says nothing about the work it does for limited companies. It does, though, mean the Ombudsman is available to you.

What NACFB membership does and doesn't mean. Two corrections here, because both of these circulate widely and both are wrong. Membership is not proof of FCA authorisation: the association's own joining page says membership 'is open to both regulated and non-regulated brokers', and professional indemnity insurance is only requested from brokers working in the property sector. And 'Patron' is not a quality mark for brokers at all. It's a paid membership tier for lenders who want access to NACFB's brokers. Membership does mean a broker has signed a code of practice with real commitments in it, which is worth something. It doesn't mean what a lot of websites say it means.

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What going direct to a lender gives you

Going direct means the conversation is between you and the people deciding. You can ask why a figure is what it is and get an answer from someone who set it, you can change the amount without a round trip through a third party, and there's no commission sitting inside the price.

With us, that buys you a tax bill paid on time, stock in before your busiest season, or a van on the road for the contract you've just won. An iwoca Flexi-Loan is a business loan with flexible repayment options: once we've approved you, you have 30 days to draw the money, so you can line it up and take it on the day you need it, and there's no fee for clearing it early when your customer finally pays. We lend to UK limited companies, and the terms are on that page.

We work with brokers too, and it would be odd to write this page without saying so. We have 200+ broker relationships, and we pay an introducer a commission based on what the customer draws down. One thing about that is worth knowing, because it's the answer to the first question in the list above. In the UK, if a broker introduces you to us, we show you the commission we'll pay them – the amount and the rate – and we can't fund your loan unless you've consented to that exact disclosure. Change how much you're borrowing and you consent again, to the new figure. One point in the broker route's favour, while we're being even-handed: if you come to us through one, we don't ask for VAT returns, because that requirement was falling unfairly on broker-introduced applications. We ask for more bank statements instead.

If you're a broker rather than a borrower, our broker page has the introducer portal and how to sign up.

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Frequently asked questions

What's the difference between a broker and a direct lender?

A broker is an intermediary. They introduce your business to lenders and arrange the deal, and they're usually paid a commission by whichever lender you end up with. A direct lender lends its own money and makes the decision itself, so there's no commission in the middle, but you only see that lender's products.

Neither is better in the abstract. A broker gives you reach across a market you can't see, which matters most when your requirement is unusual or you've been declined before. A direct lender gives you a shorter line to the decision, which matters most when what you need is straightforward.

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Can a broker help if we've already been declined?

Often, yes, and this is where brokers earn their keep. 26% of the small businesses that brokers helped had been declined elsewhere first, according to the British Business Bank's March 2026 report. Lenders differ a lot in what they'll look past, and a broker who places deals every week knows which ones.

If you'd rather understand the decline before you go anywhere, iwoca Credit Compass is free. It shows your Equifax business credit score alongside four more, what's affecting them, and the areas worth working on before you apply again.

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Should I ever pay a broker a fee up front?

Sometimes, yes. It's a legitimate model.

The British Business Bank lists charging the client a fee as one of four normal ways brokers are paid, and it's most common where a case is complicated. What to look out for is a substantial non-refundable fee charged before anyone has shown you an indicative offer. Ask what you get for it, and ask what happens to it if the deal doesn't complete.

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