Business loan broker fees: the hidden cost of ‘free’

Arranging finance is work, and somebody always pays for it.

Some brokers charge the client directly. The fee is visible, agreed in writing, and paid once. Others charge you nothing and are paid by the lender instead. That commission is usually a percentage of the loan.

Lender-paid brokers are not doing anything wrong. Many are excellent, and the model suits small, simple deals. The problem is visibility. You cannot compare two costs when one of them is hidden.

This is a separate question from whether to use a broker at all. We have answered that one honestly in our guide to brokers versus direct lenders.

Often, yes. Some lenders pay commission out of their own margin, at their published rates. Many others fund it through the deal itself. That can mean a higher interest rate than you would otherwise pay. It can also mean an arrangement or admin fee added to the loan.

An added fee is the expensive version. The stated rate understates the true cost, because you pay interest on that fee across the whole term.

Take a £150,000 loan at 14% over five years. Our published commission policy sets out the true extra cost when a broker's commission is financed inside a deal like that:

Revenue-based products can bury the cost even deeper. A merchant cash advance is priced with a factor rate rather than an interest rate. The broker's cut can sit inside that factor rate, and nothing requires it to be shown separately.

In August 2025 the Supreme Court ruled against lenders over hidden car finance commission. The FCA has since confirmed plans for an industry-wide compensation scheme. According to the FCA, more than 12 million car finance agreements could qualify.

Business borrowers have fewer protections. Most lending to limited companies sits outside the consumer credit rules entirely. So does most lending above £25,000 taken mainly for business purposes.

The courts have still stepped in where commission was fully hidden. In 2021 the Court of Appeal ordered repayment of commissions that brokers had not disclosed to borrowers, in two business mortgage cases. But the safer route is not to litigate years later. It is to ask before you sign.

You do not need to be an expert. You need five direct questions, asked before you sign anything.

Sometimes the commission model genuinely costs you less. On a small, short loan, a modest commission paid by the lender can beat a percentage fee paid by you. Speed can matter more than a marginal saving.

Neither model is wrong. But you should know which one you are in, and what it costs in pounds, before you sign.

Our own position is published. On advisory work we are paid by you, not by lenders, and we take zero lender commission. Where a lender would pay us commission, we decline it and ask for the saving to be passed to you instead. If you are weighing up business growth finance, put the five questions above to every broker on your list, including us.