Questions to Ask a Business Loan Broker
Business lending sits outside the consumer credit rules, which means the statutory protection you would have on a home loan is not there. That changes which questions are worth asking, and makes asking them properly matter more.
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The short answer
The most useful question to open with is whether the broker is acting under a statutory best interests obligation, because on business lending they generally are not. The Best Interests Duty applies to credit assistance provided to consumers under the National Consumer Credit Protection Act, and a loan taken wholly or predominantly for business purposes is generally exempt from that Act. From there, the questions that matter most on a commercial file are about personal guarantees, what security is being proposed, the facility term and what happens at review, the covenants attached to the loan, the total cost including fees rather than the headline rate, and how the broker is paid.
Start here: the protection that is missing
If you have arranged a home loan through a broker, you were covered by something you probably never thought about. Since January 2021, mortgage brokers providing credit assistance to consumers have been under a statutory duty to act in the client’s best interests, set out in the National Consumer Credit Protection Act and enforced by ASIC.
Business lending generally sits outside that Act. A loan taken wholly or predominantly for business purposes is typically exempt, and the duty does not attach to it. Neither do the responsible lending obligations that apply to consumer credit.
This is not a reason for alarm, and it is not a suggestion that commercial brokers behave badly. Most are experienced professionals doing careful work. But it does change the position you are negotiating from. On a home loan the standard is imposed by law. On a business loan, the standard is set by the broker’s own conduct, their disclosures, their professional memberships, and whether they belong to an external dispute resolution scheme.
Which is precisely why the questions below are worth asking out loud rather than assuming. A good commercial broker will answer all of them without hesitation, and several will welcome being asked.
Ten questions worth asking
1. Are you acting under a best interests duty on this loan?
Ask it plainly. The honest answer on most business lending is no, not as a statutory obligation. What you are really testing is whether the broker will tell you that straightforwardly, and what standard they hold themselves to instead. Follow up by asking whether they hold an Australian Credit Licence, whether they belong to an industry association, and whether they are a member of an external dispute resolution scheme such as AFCA. Those memberships are voluntary commitments on commercial work, which makes them meaningful.
2. How are you paid on this transaction, and will I be charged anything?
Commercial broker remuneration varies far more than residential. A broker may be paid by the lender, may charge you a fee, or both, and on complex or non-bank transactions borrower-paid fees are not unusual. A fee is not improper. Being told about it late is. Ask for the position in writing before any work begins, including what happens to any fee if the transaction does not proceed.
3. What personal guarantees will I be giving?
This is the question business owners most often skip and most often regret. It is covered in more detail below, but at minimum establish who is guaranteeing what, whether the guarantee is limited or unlimited, and whether it extends beyond the business.
4. What security is being proposed, and does it include my home?
Some facilities are secured on business assets alone. Others reach across to residential property. Both can be appropriate, and property security often improves pricing considerably, but you should be making that trade deliberately rather than discovering it in the loan documents.
5. What is the term, and what happens when it expires?
Commercial facilities frequently have shorter terms than home loans and often carry review or expiry dates at which the lender decides whether to continue. Ask what the term is, whether there is an annual review, what the lender can require at that review, and what happens if it declines to extend. This is one of the sharpest differences between business and consumer lending.
6. What covenants will the facility carry?
Covenants are ongoing conditions you must keep meeting. Breaching one can give the lender rights even if you have never missed a payment. Ask what they are, how they are tested, and whether they are realistic for the way your business actually trades. More on this below.
7. What is the total cost, not the rate?
Commercial facilities carry costs the headline rate does not reveal: establishment fees, line or facility fees sometimes charged on the full limit rather than the drawn balance, annual review fees, valuation and legal costs, and security registration. Ask for the total cost across the expected life of the facility. A slightly higher rate with lower fees is sometimes cheaper overall.
8. Which lenders do you work with on commercial, and why this one?
A broker’s residential panel and commercial panel are not the same thing. Ask which lenders they have placed transactions like yours with recently, and specifically why they are recommending the lender they are recommending. The reasoning behind the recommendation tells you considerably more than the size of the panel.
9. What could cause this to be declined, and what is the fallback?
A broker who has assessed your file properly can tell you where the weak points are before submission. If the answer is that there are none, that is worth probing. Ask what happens if the valuation comes in low, if trading softens before settlement, or if the lender’s credit team takes a different view.
10. What do you need from me, and how long will this take?
Commercial applications need more than residential ones, typically including financials, Business Activity Statements, ATO portal information, details of existing facilities, and information about the asset or purpose. Ask for the full list up front and a realistic timeframe, particularly if you are working to a contract date.
A closer look at guarantees and security
Most commercial lending to a company involves personal guarantees from the directors. This is standard practice rather than a warning sign, because a lender advancing money to a company with limited liability wants recourse to the people running it. But standard does not mean it should be signed without understanding.
The questions worth resolving before you sign anything:
- Who is guaranteeing? All directors, some, and does it extend to a spouse who is not involved in the business.
- Is it limited or unlimited? A guarantee capped at a specific amount is a very different exposure to an open-ended one.
- Does it cover this facility only, or all present and future obligations? All-obligations guarantees are common and considerably broader than borrowers expect.
- What happens if you exit the business? Guarantees do not automatically fall away when you sell your interest or resign as a director.
- What assets sit behind it? Particularly whether the family home is directly or indirectly exposed.
A broker should explain the proposed structure clearly. The documents themselves should be reviewed by your solicitor before signing. Guarantees are legal instruments with consequences that outlast the loan, and that review is not a formality worth skipping to save time.
A closer look at covenants
Covenants are the part of commercial lending that surprises borrowers most, because there is no real equivalent in a home loan. They are conditions written into the facility that you must keep satisfying for its life.
They typically fall into three groups:
- Financial covenants. Ratios the business must maintain, commonly relating to serviceability, leverage or asset backing, tested at set intervals.
- Reporting covenants. Obligations to provide financial statements, management accounts or other information by specified dates.
- Negative covenants. Restrictions on what you may do without consent, such as taking on further debt, disposing of assets, or changing the ownership structure.
The consequence worth understanding is that a breach can give the lender rights regardless of your payment record. A business that has never missed a repayment can still find itself in default because a ratio moved or financials were lodged late. In a tightening credit cycle, covenants are also the mechanism through which a lender can reprice or withdraw.
None of this makes covenants unreasonable. They are how lenders manage risk on facilities where the business, not a property, is the real security. But you should know which ones you are agreeing to, whether they are achievable in a bad quarter as well as a good one, and what the process is if you expect to breach one. Telling a lender early is almost always better than being found out late.
Red flags worth walking away from
Most brokers are straightforward. These are the behaviours that should give you pause.
- Reluctance to put remuneration in writing. Any hesitation about disclosing how they are paid, or what a fee will be, before work begins.
- Pressure to sign quickly. Urgency that comes from the broker rather than from your own transaction timetable.
- Guaranteed approvals. Nobody can guarantee a credit decision. A broker who promises one is either misinformed or telling you what you want to hear.
- Waving off the guarantee documents. Any suggestion that guarantees are a formality, or that you do not need your solicitor to look at them.
- Vagueness about covenants and review dates. If they cannot explain what the facility requires of you after settlement, they have not read it closely enough.
- Applications submitted before you have agreed the strategy. Multiple lodgements leave a trail of enquiries and make each subsequent approach harder.
- Discouraging you from getting advice. A good broker actively wants your accountant and solicitor involved, because it produces better decisions.
One thing that is not a red flag: being told your file is difficult. Honest assessment early is far more useful than optimism that unravels at credit. If a broker tells you the majors will decline this and explains where it should go instead, that is the job being done properly.
Read Intellect Finance’s real Google reviews
Answering these questions plainly, before any application is submitted, is what the early part of a commercial engagement should look like. Here are Intellect Finance’s actual Google reviews, pulled live from our Google Business Profile, so you can see how clients describe the experience. They are real and unedited.
These reviews reflect other borrowers’ experiences. They are not a promise of any particular outcome for your finance, which will always depend on your own circumstances and lender assessment.
How Intellect Finance can help
We would rather you asked these questions than not, so here are our answers up front. Intellect Finance does not charge you a fee for arranging your loan; we are paid by the lender on settlement, and in the rare situations where a fee could apply it is set out in our Credit Guide and disclosed in writing before any work begins. We hold Australian Credit Licence 390611 and are members of the MFAA and AFCA, which on commercial work are voluntary commitments rather than requirements. We will tell you where a file is weak before it goes anywhere, and we will not submit multiple applications hoping one lands. Commercial and business lending is led by Charbel, who works across bank-declined and complex files daily. We have operated since 2005. For more see our commercial loans page or our finance broker page.
Frequently Asked
Business broker FAQs
The questions business owners ask most before engaging a commercial broker.
Does a business loan broker have to act in my best interests?
Generally not as a statutory obligation, and this surprises most business borrowers. The Best Interests Duty introduced in January 2021 applies to credit assistance provided to consumers under the National Consumer Credit Protection Act. A loan taken wholly or predominantly for business purposes is generally exempt from that Act, so the duty does not attach to it. That does not mean commercial brokers act poorly. It means the statutory protection you would have on a home loan is not there, so the broker’s own standards, disclosures, professional memberships and dispute resolution membership carry more weight, not less. Asking the question directly is reasonable.
Will a business loan broker charge me a fee?
Sometimes, and it varies far more than in residential lending. Commercial brokers may be paid by the lender, may charge the borrower a fee, or both, and on complex or non-bank transactions borrower-paid fees are not unusual. There is nothing improper about a fee provided it is disclosed clearly and in writing before any work begins. What you want to avoid is finding out late. Intellect Finance does not charge you a fee for arranging your loan; we are paid by the lender on settlement, and in the rare situations where a fee could apply it is set out in our Credit Guide and disclosed in writing beforehand.
What personal guarantees will I have to give?
Ask early, because this is where business borrowing reaches past the business. Most commercial lending to a company involves personal guarantees from the directors, and many facilities are also supported by security over property. A guarantee means you are personally liable if the business cannot pay. What matters is understanding exactly who is guaranteeing what, whether the guarantee is limited in amount or unlimited, whether it is capped in time, and what assets sit behind it. A broker should be able to explain the proposed structure plainly, and a solicitor should review the documents before you sign.
Why does the loan term matter so much on a business loan?
Because commercial facilities frequently expire or come up for review in a way home loans do not. A residential loan typically runs its full term without the lender reassessing whether it wants to continue. Many commercial facilities have shorter terms with a review or expiry date at which the lender decides whether to extend, on what conditions, and at what price. If your trading has weakened or lending conditions have tightened by then, that conversation can go differently than you expect. Ask what the term is, what happens at expiry, and what the lender can require at review.
What are covenants and why should I ask about them?
Covenants are conditions written into a commercial facility that you must keep meeting for the life of the loan. They commonly cover financial ratios, reporting obligations such as providing financials by set dates, and limits on taking on further debt or disposing of assets. Breaching one can give the lender rights even when every repayment has been made on time. Many borrowers do not realise these exist until they trip one. Ask what covenants the facility carries, how they are tested, what happens on a breach, and whether they are realistic for how your business actually trades.
How do I compare the true cost rather than the rate?
Ask for the total cost of the facility rather than the headline rate, because commercial lending carries fees the rate does not show. Depending on the lender and structure these can include establishment fees, line or facility fees charged on the limit rather than the drawn balance, annual review fees, valuation and legal costs, and security registration costs. Break costs on a fixed facility can also be substantial. A slightly higher rate with lower fees is sometimes the cheaper arrangement overall, and you cannot see that from a rate comparison.
How many lenders does the broker actually work with on commercial?
Worth asking specifically about commercial rather than in general, since a broker’s residential panel and commercial panel are not the same thing. Commercial and business lending involves a wider and less familiar set of lenders than home loans, including non-bank and specialist funders that most borrowers would not find on their own. Ask which lenders they have placed transactions like yours with recently, and why they are proposing the one they are proposing. A clear answer to the second question tells you more than the size of the panel.
What if my business has had a difficult period?
Say so at the outset rather than hoping it will not surface, because it will. Past tax debt, a covenant breach, a loss year or previous declines are all things a broker needs to know before approaching anyone, since they determine which lenders are realistic. A broker who understands the specialist end of the market can often place a file that a major bank has declined. What does not work is a series of applications submitted hopefully across multiple lenders, which leaves a trail of enquiries and makes each subsequent approach harder.
The bottom line
The reason these questions matter more on a business loan than on a home loan is that the statutory safety net is thinner. The Best Interests Duty and the responsible lending obligations that apply to consumer credit generally do not extend to lending taken predominantly for business purposes. What fills that gap is the broker’s own standards and your own diligence.
If you ask only three things, make them these: how the broker is paid and whether you will be charged, exactly what you are personally guaranteeing and what sits behind it, and what the facility requires of you after settlement in terms of covenants and review dates. Those three cover most of what goes wrong. A broker worth engaging will answer all of them without being pushed, and will tell you where your file is weak before it goes anywhere.
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Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal, or tax advice. It does not take your personal or financial circumstances into account. Before acting on any information here, you should consider whether it is appropriate to your objectives, financial situation, and needs.
General guidance, not a substitute for advice on your documents. This article describes questions worth asking and general market practice at the time of writing. It is not legal advice and it is not a statement of what any particular broker, lender or facility will require. Loan terms, covenants, guarantees and fee structures vary considerably between lenders and transactions.
Commercial lending is regulated differently. A loan taken wholly or predominantly for business purposes is generally exempt from the National Consumer Credit Protection Act. That means the Best Interests Duty and the responsible lending obligations that apply to consumer credit assistance generally do not apply to business lending. Whether a particular loan is regulated depends on its purpose and circumstances. Approval is never guaranteed.
Legal and accounting matters sit outside our lane. Guarantees, security documents, covenants and loan agreements are legal instruments and should be reviewed by your solicitor before signing. The structure through which you borrow, and its tax consequences, are questions for your accountant. Nothing here is legal or tax advice. Intellect Finance provides credit assistance only.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome for your loan.
Fees. Intellect Finance does not charge you a fee for arranging your loan. We are paid by the lender on settlement, not by you. In the rare situations where a fee could apply, it is set out in our Credit Guide and disclosed to you in writing before any work begins, so you are never charged anything you were not told about upfront.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees, and terms apply.
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