Two routes to the same money
A broker can place a deal in two ways. Direct: you hold an ISO agreement with the funder and submit to its desk yourself. Through a larger ISO: you send the deal to a bigger broker (sometimes called a master ISO or house), which submits it under its own agreements and shares the commission with you. In that arrangement you are acting as a sub-ISO.
- ISOIn merchant cash advance, an ISO (independent sales organization) is the broker that finds merchants, packages their files and submits them to funders for a commission.
- Sub-ISOA sub-ISO is a smaller broker or agent that sends deals through a larger ISO instead of contracting with funders directly, and splits the commission.
- FunderA funder is the company that underwrites and pays out a cash advance or business loan. ISOs submit deals to funders and are paid commission when they fund.
- ISO agreementAn ISO agreement is the contract between a broker and a funder that sets commission rates, clawbacks, submission rules and restrictions before any deal is sent.
Working direct
| Pros | Cons |
|---|---|
| You keep the full commission the funder pays. | Funders approve ISOs selectively; many want a track record or monthly volume first. |
| You talk to the underwriter yourself, so you can explain the deal and push for exceptions. | You manage every relationship, agreement and commission statement yourself. |
| You see the real offer, buy rate and terms. | A small shop may only get agreements with a handful of funders, which limits where it can place deals. |
| Your results build your own reputation with the funder. | Clawbacks and disputes are yours to handle. |
Working through a larger ISO
| Pros | Cons |
|---|---|
| Access to many funders on day one, including ones that would not sign a new shop. | You give up a share of the commission, often a large one. |
| Help with packaging and with hard deals. | You may not see the buy rate or the full offer, only what is passed to you. |
| Someone else handles agreements and commission collection. | The merchant relationship can drift toward the larger ISO, especially at renewal. |
| Useful for products you rarely place, such as SBA or equipment. | Slower answers, because your deal sits in someone else's queue. |
Many shops do both: direct with the funders that take most of their deals, and through a larger ISO for the deals that do not fit any of their direct relationships.
Transparency questions to ask
Before sending a deal through another ISO, get these answers in writing, ideally in your agreement with them:
Questions for a partner ISO
0 of 6The same honesty runs the other way. Tell the merchant if their deal is going through another broker, and make sure the merchant receives the funder's required disclosures unchanged no matter how many hands the deal passes through. The state disclosure lesson covers who delivers what.
How the CRM helps
Ferrylend treats both routes the same way: a larger ISO can be set up as a lender with its own submission email, contacts and commission terms, so its submissions, offers and declines are tracked like any funder's. Commission splits and expected versus received commission live in commission tracking, which makes it easy to see how much each route actually pays.
Questions
What is the difference between a direct funder and an ISO?
A direct funder underwrites the deal and provides the money. An ISO (independent sales organization) is a broker that finds merchants, packages their files and submits them to funders for a commission. A smaller broker can also send deals through a larger ISO, sharing the commission in exchange for access to that ISO's funders.
Should a new broker submit direct or through a larger ISO?
New shops often start through a larger ISO because funders want a track record before signing an ISO agreement. As volume grows, most brokers move their regular deal types to direct agreements to keep the full commission and talk to underwriters themselves, and keep the larger ISO for deals that fit nowhere else.
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Related lessons
- Merchant cash advance 101The players in an MCA deal and how each gets paidMerchant, broker or ISO, sub-ISO, funder and syndicator: what each party does in a merchant cash advance, what they earn, and when the money moves.
- Commissions and renewalsHow MCA brokers get paidPoints on the funded amount, upsell between buy and sell rate, residuals where they exist, clawbacks on early default and when the money actually arrives.
- Commissions and renewalsSplitting commissions with reps, partners and sub-ISOsHouse and rep splits, sub-ISO and referral partner shares, fronters and closers, a worked example of one commission split four ways, and why it goes in writing.
- Lender matching and submissionsBuilding and maintaining a lender listWhat to record for every lender you submit to (criteria, contacts, submission address, turnaround, commission terms) and how to keep the list current.