Fees, points, buy rate and sell rate

Most funders charge an origination fee, sometimes called an underwriting or processing fee, as a percentage of the advance or a flat amount. It is deducted at funding, so the merchant receives less than the advance amount. Other deductions can include a bank or wire fee and, on a renewal or consolidation, payoffs of existing balances.

net funding = advance - origination fee - other fees - payoffs

Net funding is the number that matters to the merchant. A merchant who asked for $60,000 and receives $58,200 will notice, so say it before the contract does.

When a funder approves a deal it quotes the buy rate: the lowest factor it will accept from the broker. The broker may present the offer at a higher sell rate, up to the funder's cap. The difference, in hundredths of a factor, is upsell, and each hundredth is one point of the advance.

On top of that, the funder pays a base commission, also quoted in points, under the ISO agreement. Base plus upsell is the broker's commission. Agreements differ on the basis (advance, net funding or payback), on caps, and on whether upsell is paid in full.

upsell points = (sell factor - buy factor) x 100
commission    = basis x (base points + upsell points) / 100

An auto repair shop is approved for $60,000. Buy rate 1.27, base commission 5 points on the advance, 3% origination fee. The broker presents it at 1.33.

upsell points        = (1.33 - 1.27) x 100       = 6
base commission      = $60,000 x 5%              = $3,000
upsell commission    = $60,000 x 6%              = $3,600
total commission     = $3,000 + $3,600           = $6,600 (11 points)

If the shop pays its closer 40% of commission, the rep earns $2,640 and the house keeps $3,960. Run your own splits in the ISO commission calculator.

Now look at the same deal from the merchant's side. Every dollar of upsell is a dollar of extra payback.

The $21,600 breaks down as $16,200 of funder pricing at the buy rate, $3,600 of upsell and $1,800 of fee. The base commission does not show up as a separate cost because the funder pays it out of its own pricing. The upsell does: it comes straight out of the merchant's pocket.

Some brokers also charge the merchant a separate broker fee. Several states restrict broker fees, especially any collected before funding, and disclosure laws can require them to be shown. Check the disclosure laws guide and counsel before adding one.

Enter the buy rate, sell rate, fee and commission basis in the offer calculator and it shows upsell points, your commission, net funding and the cost of capital as you type, with commission visible only to your team. When the deal funds, commission tracking records base and upsell as separate expected commissions, applies rep and partner splits, and lets you reconcile the lender's statement against them.