[ClearFund]

As I've said many many times.... we brokers work for ourselves, but out obligation is to bring people who need money to people who have money and want to give it out to make a return, in whatever form that may be. As long as both sides are happy with their solution, they are generally okay with the broker making some extra money.

That being said, this is a working theory, please help me make it better, just thought of it now:

Nobody "deserves" someone else's money. There's a market that creates the pricing, and I guess to put it in modern terms, there's no "fiat" value of how it "should" be, it acts more like a commodity, adjusting itself to demand and risk. So as long as the money is being dolled out in a way that the risks and rewards are taken into account from all sides, then it's "fair" and not "greedy." It's never really "unfair," it's just that underwriters are dictating what they calculate the risk-reward is on this investment/loan/advance. "Greedy" would be intentionally overleveraging the client out of business just to sue them, or a hostile takeover.

I'm interested in developing this train of thought..... any other insights?

Looks like you've been studying lots of Crypto lately - hence the terminology.

[Sachip24]

The commission structure does play a part here, I can agree on that. But let's say I fund a $10k deal and we're already taking the industry standard 5% fee so merchant nets $9,500, and then ISO turns around and takes another $500-$1,000 PSF, ON TOP of me paying them $1,200? No longevity in that kind of model. Especially when the ISO just slides in the PSF form without selling it and then the morning after funding, I have an angry merchant threatening to stop payment because they weren't sold on the PSF. No chance that merchant will renew.

so you as the lender that's making the return on the money can charge psf but an ISO is greedy if they charge one? ...ohh ok

[mistamca]

I appreciate that there might be shady characters involved ( both funder & ISO ) but let's assume everyone is honest for a second.

The funder puts up the money & the cost to underwrite & service the advance. They pay double-digit commissions to receive deals to fund. They pay high rates for the money that they use to fund (typically). They also need to account for defaults and fraud. Let's not forget leaving money for growth because who wants to work with someone that is not growing in any direction.

When they underwrite the deal, they are taking into account all of these expenses. This is also a competitive market so they are making sure that they can give the best offer, which is typically the highest dollar amount.

If they try to give you the best (biggest) offer & then you try to charge an additional fee to this, then you can be a driving factor for a default i.e. you can't say you should have underwritten this better when they try to clawback the commission.

PSF is a goldilocks situation. There is always a time & place albeit I do not mess with 3+ positions (charge psf incase cm gets clawed back so you still make money ) anymore so most of my "PSF" fees are packaging fees & I even charge an hourly rate for most SBA deals. Everyone knows the costs & there are no complaints.

[Yankeeman07]

When a merchant does NOT in some manner authorize the PSF Deduction from his/her bank account,
a broker will have issues -

Without going into a drawn out explanation - NACHA Regulations have a return & a Claw back Period:
https://www.nacha.org/rules/return-q...le-transaction

[ridextreme]

I pay 12 points on all deals and NONE of my best ISO'S charge a PSF ever.

Yeah, ok... none that you know of, that is.

[ryanh]

If you are pulling a PSF on an MCA that is an excellent way to lose a client in an industry that already has an absurdly high customer acquisition cost. If you are charging a PSF on a client who is even remotely going to be a good client a lot of brokers like myself are being provided free ammunition to persuade a merchant to never go back to you. Short sighted thinking.

PSF's outside of MCA's on deals with longer time tables that require considerable work with thinner margins are 100% reasonable.

[ridextreme]

If you are pulling a PSF on an MCA that is an excellent way to lose a client in an industry that already has an absurdly high customer acquisition cost. If you are charging a PSF on a client who is even remotely going to be a good client a lot of brokers like myself are being provided free ammunition to persuade a merchant to never go back to you. Short sighted thinking.

PSF's outside of MCA's on deals with longer time tables that require considerable work with thinner margins are 100% reasonable.

I find it to be the opposite - usually the longer term thinner margin deals have strong credit and wouldn't even sign a PSF to begin with. When to charge or not to charge a PSF and now much depends on the deal. If it's an A paper deal, you might lose the deal if you charge one but if it's a 550 credit and 2nd pos. deal and you don't charge a PSF you're definitely leaving money on the table.

[TheUnderwritingProdigy]

I appreciate that there might be shady characters involved ( both funder & ISO ) but let's assume everyone is honest for a second.

The funder puts up the money & the cost to underwrite & service the advance. They pay double-digit commissions to receive deals to fund. They pay high rates for the money that they use to fund (typically). They also need to account for defaults and fraud. Let's not forget leaving money for growth because who wants to work with someone that is not growing in any direction.

When they underwrite the deal, they are taking into account all of these expenses. This is also a competitive market so they are making sure that they can give the best offer, which is typically the highest dollar amount.

If they try to give you the best (biggest) offer & then you try to charge an additional fee to this, then you can be a driving factor for a default i.e. you can't say you should have underwritten this better when they try to clawback the commission.

PSF is a goldilocks situation. There is always a time & place albeit I do not mess with 3+ positions (charge psf incase cm gets clawed back so you still make money ) anymore so most of my "PSF" fees are packaging fees & I even charge an hourly rate for most SBA deals. Everyone knows the costs & there are no complaints.

This 1000%. If I'm putting my 10's of 1,000's of $$$ of my money on the line, charging a PSF just increases the already high rate of default.

[TheUnderwritingProdigy]

If you are pulling a PSF on an MCA that is an excellent way to lose a client in an industry that already has an absurdly high customer acquisition cost. If you are charging a PSF on a client who is even remotely going to be a good client a lot of brokers like myself are being provided free ammunition to persuade a merchant to never go back to you. Short sighted thinking.

PSF's outside of MCA's on deals with longer time tables that require considerable work with thinner margins are 100% reasonable.

This is a huge takeaway for all the noob ISO's in this thread. LEARN FROM THIS MAN!

[Ifunddaily]

Depending on the funding amount, For bigger amounts, we like to give the merchant some room to breathe with the capital so for larger deals we would set up recurring weekly debits for the total amount.

Up to 10% as max. 3.5- 5% on micros.

lmaooo at 10%!! that's comical considering merchants pay about 5% OFEE to funder while paying 1.45 taking 10% on top of that should be a felony