Commission is a word that gets thrown around a lot in finance, but what does it really mean for your business? Maybe more importantly, what does commission disclosure mean, and why should you care?
Understanding the Basics
Whenever a broker arranges finance for your business, be it for vehicles, equipment, or other business assets, they might get a commission from the lender. This isn’t new. What is new, though, is how openly that commission now needs to be declared.
Thanks to evolving FCA regulations, brokers are now required to be much clearer about what they’re earning from the deals they arrange. It’s all part of a push towards commission transparency and more information around financial decisions.
In other words, it’s about fairness.
You get a clearer picture of the costs involved, and you can make up your own mind if the finance being offered genuinely works for your business or whether it’s only working for the broker’s commission.
Why Have FCA Commission Disclosure Regulations Changed?
The FCA regulates how financial services operate in the UK. After reviewing practices in the motor finance market, they found that some commission models could potentially lead to conflicts of interest. There were situations where the more you paid, the more the broker earned, which is a problem.
Because of this, certain commission models were banned altogether, and the requirements around commission disclosure have continued to grow, not just in motor finance but across different parts of business asset finance.
Today, if you ask, brokers are required to tell you whether they’re being paid commission. In many cases, they’ll also need to explain how that commission is calculated. The aim is to minimise guesswork for you and give you more confidence in the numbers.
How Commission Disclosure Works in Practice
When you’re arranging finance for new business assets like machinery, IT equipment, or even office furniture, your broker has to explain upfront whether a commission will be paid.
This might be a flat fee or a percentage of the total amount financed. In some cases, it can even vary depending on the length or structure of the agreement. That’s why it’s helpful to ask for the information at the quotation stage, and not wait until the deal is done.
You’ve got the right to know if a broker stands to earn from recommending one lender over another.
That’s not to say commission is a bad thing.
Brokers offer an absolutely vital service. They compare deals, find suitable lenders, and help you access finance that, on your own, you might not have been able to get. The key is that they’re upfront about it, which is how commission transparency gives you the tools to make the right call for your business.
What Commission Disclosure Means for Your Decision-Making
There’s more choice in the finance market than ever before, which isn’t a bad thing, but it can mean more complexity. FCA regulations around commission disclosure are one of the ways to help you cut through that complexity. By knowing how your broker is being paid, you can ask questions that are a bit more useful.
Is this the best rate available?
Why was this lender chosen?
How does this compare to other offers?
If you don’t like the answers, you’re free to look elsewhere or ask for more details. And brokers who know their worth will be more than happy to explain. Remember, if they’re delivering real value, they’ll want you to see it.
How Does Commission Disclosure Impact Cost?
Some businesses might worry that commission disclosure will lead to higher costs as brokers try to make up for transparency by charging more. In reality, it can often have the opposite effect. If FCA regulations mean that costs need to be open and visible, it stands to reason that competition improves. Brokers are more likely to price fairly, and lenders are more likely to offer terms that stand up to scrutiny.
This is especially important when financing essential business assets.
It might be a new production line or an upgraded logistics software; either way, every extra pound counts. Knowing what you’re paying (and who benefits) makes it much easier to stay on budget and protect your bottom line.
What to Look Out For
If you’re arranging finance and want clarity, there are a few handy questions to have in your back pocket.
Will you receive commission from the lender?
A reputable broker won’t shy away from answering.
How is that commission calculated?
Fixed fee, percentage, or something else? You’re entitled to know.
Is your recommendation influenced by the level of commission?
This one’s key. If there’s obfuscation or confusion in the answer, it could be a red flag.
You can also ask for a copy of the lender’s commission disclosure policy. A lot of lenders publish this online or include it in pre-contract documentation, too.
The key thing to remember is don’t be afraid to challenge what you don’t understand. You’re not being difficult, you’re being diligent.
Want Clarity, Confidence, and Support You Can Count On?
At Bluestar Business Finance, we believe in open, honest communication. Our team supports UK businesses in financing essential business assets with straightforward advice, smart solutions, and full commission transparency. We work with a wide panel of lenders to find finance that fits, and we’re always clear about our processes. Find out more about our services here, or get in touch with any questions.
“Transparency in commission structures isn’t just a regulatory or legislative requirement; it’s a cornerstone of trust. When brokers clearly disclose how they’re compensated, it empowers clients to make informed decisions and reinforces the integrity of our entire sales process.” (Ben Matthews, Sales Manager)
FAQs
Is commission always charged when using a broker?
Not always. Some brokers work on a fee basis instead of commission. It’s best to ask upfront how they’re paid.
Can I ask for a breakdown of costs in my finance agreement?
Yes. You’ve got the right to understand all fees, charges, and commissions involved. Transparency is absolutely a regulatory requirement.
What if I’m not happy with the level of commission disclosed?
Then you aren’t obliged to proceed. If something doesn’t feel right, you can ask for alternatives or just walk away altogether.
Does commission affect the quality of the finance deal?
Not necessarily. A good broker will still find the most suitable deal, regardless of commission. But asking the right questions helps make sure that’s the case.
Is this disclosure rule only for motor finance?
No. While it began with motor finance, broader changes now affect other types of asset finance too, especially when regulated by the FCA.
