When & how do loan brokers get paid?

April 30, 2024

by a searcher from Yeshiva University - Sy Syms School of Business in Boca Raton, FL, USA

I'm working with a loan "consultant" and I thought we discussed (back in January) that he gets paid from bank at closing. Yesterday, he sent me an invoice to get paid now (I have a commitment, but the inv is even if the loan fails for any reason). I don't have anything in writing in either direction.

Is this common? I'm under the impression that SBA brokers get paid at closing, and usually get paid by the bank. Am I mistaken?

Thanks in advance!

1 Like

17 Replies

204 Views

Replies

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

We are a Commercial Loan Brokerage Shop and have been in business for 15 years now. We work purely on a "Success Fee" basis meaning we only get paid if the deal closes. When we do SBA 7A lending just about all of our SBA 7A lenders pay us a referral fee out of their back end profit so we do not need to charge the customer. As it relates to your specific situation, it really depends on what agreement you have signed with the broker. If you have an agreement that requires you to pay them whether the deal closes or not, then you are at risk of having to pay them either way. But I would not think you would need to pay them in advance before the deal is even finalized unless you have an agreement that requires that. I have seen some broker agreements from other firms that requirement payment upon successful approval of a loan, whether it closes or not. I would never advise a client to enter into such an agreement. . Also, the SBA does not allow brokers to charge the customer both directly and to collect a fee from the lender. So you will want to verify he is not getting paid in both places. I hope this information helps. If you have additional questions you can reach me here or directly at redacted

Reply by a lender
from University of California, Berkeley in San Diego, CA, USA

That sounds very sketchy. I get paid at closing by my SBA lenders. There are some SBA lenders who do not pay brokers, in which case the broker should set up a fee agreement with their client before a term sheet has been signed. Unfortunately, I have heard of brokers charging additional fees at close on top of the fee paid to them by lenders, or charging up front fees to broker the transaction. I never do this.

If the broker in this case is not getting paid by the lender, he should have created a written agreement with you when you first started working together. Springing an invoice on you now is unacceptable and gives loan brokers a bad name.

+15 more replies.

Join the discussion