Bank vs broker
Go to your bank first. Then read this.
If your bank will do the deal, your bank is almost always the cheapest money available, and no broker should tell you otherwise. The question is what happens when the answer is no, when the answer is slow, or when the bank does not lend against the thing you need financed. This page says plainly what a broker adds, what it costs, and what a broker cannot do for you.
The short answer
The bank, if the bank will do it.
Then the detail, if you want it.
Start with the institution that already holds your deposits. It has your history, its cost of funds is the lowest in the market, and the relationship is worth something in a bad year. If it approves, take it.
A broker earns its place in 4 situations. The bank declined and you do not know which of the 40 non bank lenders in the market has appetite for a business like yours. The bank is slow and the need is dated. The financing is a structure the bank does not do at all, such as receivables purchase, mezzanine, unitranche, or the retirement of stacked advance positions. Or the transaction is large enough that running counterparties against each other is worth more than any fee involved.
What a broker actually sells is a competing process and a file that survives underwriting. What a bad broker sells is your contact information, several times.
Side by side
Where they actually differ.
| Direct to your bank | Through a broker | |
|---|---|---|
| Cost of capital | Lowest available | Set by the counterparty, not the broker |
| Who pays the intermediary | No intermediary | The lender pays the broker at funding, on a placement |
| Breadth of appetite | 1 credit box | Many counterparties, scored for appetite before submission |
| Speed | Slower; committee and review cycles | Faster, when the file is complete |
| Products | Term, line, SBA, equipment, real estate | Those plus factoring, mezzanine, private credit, buyouts, equity |
| What happens on a decline | The conversation usually ends | The file moves to the counterparties that take that profile |
| Relationship value | Real, and worth protecting | Transactional unless the firm runs advisory mandates |
| Who makes the credit decision | The bank | The lender or funder, never the broker |
| Risk to you | Time | A bad broker shopping your file to everyone at once |
General descriptions of common structures, not offers and not a ranking. Every facility is arranged through third party lenders and funders and is subject to their underwriting, documentation and approval; the actual agreement governs.
What a broker cannot do
The claims that should end the conversation.
What to ask any broker
No broker can approve you, guarantee an amount, guarantee a rate, promise a timeline that binds a lender, or change a credit decision by wanting it more. Any firm that tells you otherwise before reading your statements is selling something else. A broker also cannot make a weak file strong; it can make a strong file legible, which is a real and underrated difference.
The questions that separate an advisory firm from a lead seller: How are you paid, and will you put the number in writing before I sign? How many counterparties will actually see this file, and do I approve the list first? Will you tell me the annualized cost of every offer, computed the same way? What happens to my information if I do not proceed? Will you tell me when the answer is that I should not do this at all?
If a firm will not answer the first question in a sentence, stop. Citadel Ridge answers it on 1 page.
What goes wrong
The mistakes that cost the most.
Letting your file be blasted to 30 funders
Submitting everywhere at once produces a wave of hard inquiries, a week of cold calls, and counterparties who assume everyone has already declined you. Your file should go only to counterparties scored for appetite, on a list you approve.
Paying an advance fee for a placement
A legitimate placement is paid by the lender at funding. Advance application, packaging or processing fees are prohibited outright in several states and are a reliable signal to walk away everywhere else.
Treating the first offer as the market
A single offer is not a process. Until 2 or more counterparties have priced the same file, you do not know what the file is worth.
Not asking what the broker is paid
On revenue based paper, broker commission commonly rises with the factor rate. If nobody will tell you the number, assume it is influencing which offer you were shown first.
Skipping the bank because a broker said it would decline you
That prediction is worth very little and it is not disinterested. Ask your bank. It takes a week and it can save 20 points.
Questions
What owners ask.
Does a broker cost me more?
On most transactions the commission is paid out of the counterparty pricing rather than added to it, and the same funder often quotes the same paper direct at the same price. What changes your cost is competition among counterparties, which is what the process is for.
Will a broker pull my credit?
A credit authorization is usually part of the intake, and lenders pull when a file is submitted to them. Ask whether the initial review is a soft inquiry and exactly when a hard pull occurs. Citadel Ridge does not pull credit to give you the initial read.
What if I have already applied somewhere?
Say so up front. A file that has been shopped widely is harder to place, and a broker who does not know where it has already been will duplicate submissions and hurt you.
Is a broker regulated?
It depends on the state and the product. A number of states now require registration for brokers of sales based financing, prohibit advance fees, and require the provider disclosure to pass through unaltered. The landscape is set out on the state disclosures page.
What does Citadel Ridge do that a bank does not?
Runs a competing process across counterparties with demonstrated appetite for your profile, converts every offer to a comparable annualized cost, negotiates guarantee scope and covenants where the facility is large enough to carry that conversation, and says plainly when the answer is no transaction at all.
Start with the file
A straight read within 2 business days.
Send the basics through the intake form: what the file supports, what is missing, and the next step if there is one. If we are not the right desk for it, we say so.