November 23, 2022

BLaaS for Financial Brokers

Are you a financial broker? Here’s how you can reach more customers and grow your revenue.

Financial brokers play a vital role in the commercial ecosystem. They help keep the lending wheels turning by connecting entrepreneurs to the funding they need to start or grow their businesses. And in turn, lenders acquire new customers.

This might seem like an easy gig, but successfully bringing lenders and borrowers together takes a certain level of knowledge in the commercial lending industry, a dense business network, and excellent negotiation skills. In fact, financial brokering can be quite challenging, especially given the prevailing economic climate.

If you’re a financial broker in any commercial niche, this article is a must-read. It discusses the main challenges commercial brokers face and, more importantly, how Business Lending as a Service (BLaaS) can solve them. Read on and learn a new way to get the most out of your commercial brokerage business.

Top 5 problems financial brokers face today

Before we get to BLaaS, let's highlight some of the challenges plaguing commercial brokers in today’s financial market. Here are five key issues you can probably relate to:

1. The changing financial landscape

The business lending environment is highly dynamic. Disruptive changes in the financial sector can sometimes mean bad news for commercial brokers, particularly those operating in highly volatile markets. The industry has experienced several such changes over the last few years, challenging the status quo in banking and commercial lending.

The COVID-19 pandemic, tech penetration in financing, a looming recession in 2022, and progressive banking practices such as Banking as a Service (BaaS) and open banking have collectively motivated the financial evolution we see today. Accenture neatly sums this up by highlighting the most disruptive commercial banking trends today, most of which are already impacting financial brokers. These trends include:

  • Increasing digitization and automation centered around fintech and customer relationship management (CRM) systems in banks
  • Rapid growth of embedded finance, i.e., non-financial companies offering alternative lending solutions to fellow businesses
  • Increasing rate and sophistication of fintech-bank partnerships
  • Narrowing focus on sustainability as a selling point for banking services

None of these changes are inherently bad; if anything, they represent progress. However, they are quickly redefining the meaning of commercial lending and the relationship between businesses and lenders, gradually removing brokers from the picture. For instance, a financial broker may have no place in fintech-based B2B lending, where one organization provides capital directly to its customers. Plus, as big banks lose market shares to alternative lenders, so do financial brokers who focus on advocating SMB loans to institutional lenders.

2. Lost opportunities due to borrower-lender mismatch and limited product offerings

Have you ever lost an opportunity because your portfolio lacked the ideal funding product for a particular client? If you have, you’re not alone. Lost opportunities due to borrower-lender mismatch is a common problem for financial brokers.

There is a limited range of lending products that any financial broker can mediate at any given time. That range is even narrower for those working exclusively with big banks and small businesses. Big banks offer rigid lending solutions unsuitable for most SMBs and start-ups. Also, many entrepreneurs are picky and cautious borrowers. The 2022 Small Business Credit Survey shows that the number of SMBs seeking traditional funding fell to 34% in 2021. In the same year, more than half (66%) of SMBs needed capital but chose not to apply for financing.

Images by Loanspark

3. Lacking essential data to manage client expectations

The modern business world runs on data. Information is arguably more important in finance than in any other commercial sector. Analysts point out that national economies that embrace financial data sharing today could see GDP gains of up to 5% by 2030. This explains why data analytics in banking is such a big deal.

Financial data reveals actionable market trends and insights to commercial brokers that might help inform brokerage decisions. For instance, lending trends can show you the most lucrative funding solutions and borrowers to targets, competitive commission benchmarks, and the general direction to steer your business. Unfortunately, such data can be hard to come by, even with open banking.

4. Fierce competition in the financial market

The financial industry is a fiercely competitive space. Currently, there are 4,771 FDIC-insured depository institutions and countless other smaller banks and credit unions, not to mention the rapidly growing number of alternative lenders. Each of these lenders has their sights set on a limited commercial lending market. So, most lenders are prepared to do all it takes to stand out, including fostering intimate relationships with borrowers and eliminating the need for intermediaries.

Take online business loans, for example. Most of these are straightforward because they’re designed to simplify the lending process as much as possible. With such offerings, borrowers can quickly check their qualifications, apply for various products, negotiate terms, and get approved through a self-service platform without requiring third-party assistance.

5. Dwindling commission margins

All these factors combined — stiff competition, changing financial landscape, limited access to financial data, and narrow range of offerings — can significantly affect your broker commission margins. Sometimes, you might have to sacrifice a portion of your earnings to close a deal.

Borrowers are very keen on lending costs, especially with everything that’s going on with the rising inflation and interest rates. So, a high broker commission can be a dealbreaker for some borrowers.

Images by Loanspark

Enter Business Lending as a Service (BLaaS) with Loanspark

BLaaS is a commercial lending service that enables financial and non-financial organizations to offer capital solutions to various business communities. A BLaaS provider like Loanspark extends its fintech resources and team to help B2B businesses offer and expand branded funding products for their customers. This is largely the concept behind the disruptive embedded finance we mentioned earlier.

What does all this have to do with your financial brokerage business? Loanspark is a multifaceted BLaaS provider touching on all aspects of the business financing ecosystem. We work with financial brokers to expand their product variety so as to position them between the right lenders and the right borrowers. Here’s what Loanspark can do for your company by linking it to curated funding products and lenders:

  • Expand and diversify your product catalog
  • Minimize your sales and operational overhead
  • Accelerate your entry into the SMB-oriented embedded financing market
  • Provide you with endless cross-selling opportunities
  • Widen your brokerage portfolio and scope

Loanspark does not compete with financial brokers; instead, we help them expand their offerings in order to reach more customers and generate more revenue. You get to keep all your referrals. Partnering with Loanspark also secures you a place in the vibrant embedded finance market.

Let’s discuss solutions to all your commercial lending pain points, one new brokering opportunity at a time.

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