Loan Marketplace vs. Direct to Bank: How to Shop for Business Financing

You can apply for business financing directly with individual banks, or use a marketplace that connects you with multiple lenders at once. Each approach has trade-offs.

Understanding how marketplaces work — and when they help or hurt — can save time and improve your outcomes.

How Each Approach Works

Marketplace Pros and Cons

Advantages:

• Time savings — One application instead of 5-10
• Comparison shopping — See multiple offers side-by-side
• Access — Reach lenders you might not find on your own
• Competition — Multiple lenders competing may improve terms
• Guidance — Good marketplaces help you understand options

Disadvantages:

• Less control — You do not choose which lenders see your application
• Possible fees — Some marketplaces charge borrowers; others charge lenders
• Quality varies — Not all marketplaces are equally reputable
• Limited products — May not include all lender types (like community banks)
• Sales pressure — Some marketplaces push faster (higher-cost) options

Direct-to-Lender Pros and Cons

Advantages:

• Relationship — Build a relationship with your banker
• Full story — Explain nuances that forms cannot capture
• Negotiation — More room to negotiate terms directly
• No middleman — Communicate directly, no intermediary confusion
• Access to all products — Some products not available through marketplaces

Disadvantages:

• Time-intensive — Each application is a separate process
• Limited visibility — You might miss better options
• No comparison — Harder to know if you are getting a good deal
• Relationship required — Some banks prioritize existing customers

When Marketplaces Work Best

• You are new to business financing — Good for understanding your options
• You want to compare — See what different lenders will offer
• Your situation is straightforward — Standard loan need, standard business
• Time is limited — Cannot invest weeks applying to multiple lenders
• You do not have banking relationships — No existing bank to start with

When Going Direct Works Best

• You have existing bank relationships — Your bank should see your deal first
• Your situation is complex — Needs explanation beyond standard forms
• You want SBA loans — SBA-specific lenders may not be on all marketplaces
• You value relationship — Building long-term banking relationships
• You are looking for specific products — Equipment financing, real estate, etc.

What Good Marketplaces Do

Reputable lending marketplaces:

• Transparent about their role — Clear about how they make money
• Show multiple options — Not just one lender
• Disclose all costs — APR, fees, total repayment clearly
• No pressure — Let you make informed decisions
• Quality lenders — Vet lenders for reputation and practices
• Protect your data — Clear privacy policies, no data selling

Red Flags in Marketplaces

Watch out for:

• Upfront fees — Reputable marketplaces do not charge borrowers to match
• Single option — If they only show one offer, they may have an incentive
• Pressure tactics — "This offer expires today" or similar urgency
• Unclear terms — If you cannot understand the cost, do not proceed
• Bait and switch — Quoted rates that change significantly at closing
• Excessive contact — Selling your information to multiple lenders

The Smart Shopping Process

Here is a practical approach to finding the best financing:

• 1. Start with your bank — If you have a deposit relationship, they should see your deal first
• 2. Check SBA lenders — Use SBA Lender Match for SBA-specific options
• 3. Use 1-2 quality marketplaces — Get a view of online lender options
• 4. Compare apples to apples — Convert everything to APR and total cost
• 5. Read the fine print — Prepayment penalties, fees, payment terms
• 6. Negotiate — Especially with banks and on larger loans

The Bottom Line

Marketplaces are tools, not magic. They can save time and surface options, but they do not replace your judgment.

The best approach is often hybrid: check your existing relationships, use marketplaces for comparison, and make decisions based on total cost and fit — not just speed or convenience.

Whether you go direct or through a marketplace, your goal is the same: the right financing at the best available terms. The path matters less than the destination.