How MCA brokers get paid

Most broker income on an advance comes from the funder, not the merchant. The funder pays a commission expressed in points: one point is 1% of the amount funded. Six points on a $50,000 advance is $3,000. The commission schedule sits in your ISO agreement with each funder, and it often varies by program, paper grade and deal size.

Check what the points are paid on. Most funders pay on the advance amount, some on net funding, and on a renewal some pay on the full new advance while others pay only on the new money after the old balance is paid off. The difference on a renewal can be thousands of dollars, so read the agreement.

• Buy rateThe buy rate is the lowest factor a funder will accept on a deal from an ISO. The ISO can sell above it, and the gap becomes upsell commission.
• Sell rateThe sell rate is the factor rate the merchant actually signs, set by the ISO at or above the funder's buy rate. It decides the payback and the ISO's upsell.

Many funders let the broker price the deal above the buy rate, up to a cap, and pay the difference as extra points. As a rule of thumb, each 0.01 of factor above buy is worth about one point on the advance.

advance                  = 50,000
buy rate 1.30, sell 1.34 -> upsell = (1.34 - 1.30) x 100 = 4 points
base commission          = 50,000 x 6% = 3,000
upsell                   = 50,000 x 4% = 2,000
total                    = 10 points   = 5,000
merchant payback         = 50,000 x 1.34 = 67,000 (vs 65,000 at buy)

The upsell is money the merchant pays: $2,000 more payback in this example. That is legitimate when it is disclosed and the deal still makes sense for the merchant, and it is the first thing a merchant notices when a competing broker brings the same funder at a lower rate. Price as if the merchant will compare, because they often do.

• Renewal commission. A renewal pays again, on whatever basis the agreement says. A book of merchants who renew is worth more than the first deals alone.
• Residuals. Some products pay a small ongoing share while the merchant keeps paying, more often on lines of credit or certain loan programs than on advances. Where they exist, they are written into the agreement; do not assume one.
• Merchant-paid broker fees. Some brokers also charge the merchant a fee. Several states restrict or require disclosure of such fees, so check before charging one. See state disclosure laws.

• ClawbackA clawback is a funder taking back an ISO's commission because the merchant defaulted or stopped paying within a set window after funding, often 30 to 90 days.

The window and the amount are set in each ISO agreement: some funders take back the full commission if the merchant defaults within the window, some take a share, and some count the window in days and others in payments. If the $5,000 deal above defaults inside the window, the funder may net $5,000 off your next commission statement, even though you paid your rep weeks ago. Decide in writing how a clawback flows through your splits before it happens (see splitting commissions).

Many funders pay commissions within a few business days of funding, by ACH or on a weekly or monthly statement. Others batch. Track each funder's usual speed so you notice when a payment is late, and never pay a rep out of money you have not received yet unless you have decided to carry that risk.

When you mark a deal funded in Ferrylend, you enter the Base commission, the Upsell points and what it is Paid on (Advance, Net funding or Payback), and the expected commissions are created with a preview of the base, upsell, partner, rep and house amounts. Each lender holds its default commission, Clawback window (days) and Payout speed (days).

Commissions are tracked as expected, received, disputed, clawed back or void. See commission tracking and try the numbers in the free ISO commission calculator.