Choosing Between Flat Fee, Commission And Percentage Brokers

When looking at commercial finance brokers, you will often be choosing based on the type of fees that the brokerage will charge. In general, there are three major types of fee: flat fee, commission and percentage. Some companies will do a mixture of these three types while others will charge only one. No type of fee structure is inherently better than the other, it simply depends on what your business is looking for.

Flat Fee: Consultation-Based Charges

A flat fee doesn't necessarily mean you only pay one fee and then you're done. Many flat fee commercial finance brokers charge by the hour, just like an accountant or lawyer. These consultations can be very useful because once you've paid for the consultation, you don't need to pay for anything else -- regardless of how much money you make. Flat fee brokers will usually develop a plan for you and will charge you based on the amount of work they perform related to your work. However, the charges are often quite high even on a flat fee basis, because the brokers don't make any commission.

Commission: Performance-Based Charges

Commission-based brokers are often seen as more eager to perform well because they take only a percentage of your earnings rather than a flat fee or a percentage of the total investment. By the same token, some may worry that commission-based brokers may be inherently more risky as other brokers; they do not pay out money should they lose money rather than gain it, so they may be more inclined to take bets that will have a greater payoff. For someone with a riskier investment outlook, this might be a good match. 

Percentage: A Percent of the Total Invested

A percentage fee is based on the total amount of the money that is being managed, whether there are losses or gains. Percentage-based accounts may be less than optimal for those with larger amounts of money to invest but they are usually still not as expensive as flat fee based brokerages long term. However, because they usually charge a relatively low percentage, percentage brokerages may be inclined to promote other investment products, which can come with additional fees. 

Of course, fees aren't the only thing you need to consider when choosing commercial finance brokers. A good broker will pay for their own fees regardless. But it is one major consideration to take into account, especially if you are working with large sums of money.

For more information, contact Dark Horse Financial or a similar company.