[Dailyfrog]

Hello,
A friend that owns an iso told me that he thinks of redirecting deals to another funder since they give him the following offer which supposedly making the iso more money than the funder itself.

The offer is this:
Every deal that the iso submits and he syndicates 50% the following terms apply:
1- 12 points to the broker at 1.50 (nothing special)
2- 50/50 split on the closing costs
3- No syndication fees, funder says he pays a super low fixed price that isn't volume dependent with his bank so he doesn't charge management
3- They split nsf's/bounced payments fee (the funder claims he only gets charged $1.50 on nsf's so they split a buck fifty)
4- in case of a default they split collection cost

In a case of a 100K @1.50 with 10% closing cost deal that paid in full the broker and the funder both make this:
ISO - 50K X 1.5 = 75K +5K closing cost + 12K commission - 6K (participation to iso on the deal) = 86K (gross) - 50K principle = 36K net rev
Funder - 50K X 1.5 = 75K +5K closing cost - 12K commission + 6K (iso participation on the deal) = 74K (gross) - 50K principle = 24K net rev

This means that the ISO is making 72% on the money and the funder walks away with 48%

Is this a real / possible offer?

[Akanner]

Hard to imagine as the funder needs to pay for the CRM, Ach processor, Accounting/ QuickBooks etc

[Michael I]

Hello,
A friend that owns an iso told me that he thinks of redirecting deals to another funder since they give him the following offer which supposedly making the iso more money than the funder itself.

The offer is this:
Every deal that the iso submits and he syndicates 50% the following terms apply:
1- 12 points to the broker at 1.50 (nothing special)
2- 50/50 split on the closing costs
3- No syndication fees, funder says he pays a super low fixed price that isn't volume dependent with his bank so he doesn't charge management
3- They split nsf's/bounced payments fee (the funder claims he only gets charged $1.50 on nsf's so they split a buck fifty)
4- in case of a default they split collection cost

In a case of a 100K @1.50 with 10% closing cost deal that paid in full the broker and the funder both make this:
ISO - 50K X 1.5 = 75K +5K closing cost + 12K commission - 6K (participation to iso on the deal) = 86K (gross) - 50K principle = 36K net rev
Funder - 50K X 1.5 = 75K +5K closing cost - 12K commission + 6K (iso participation on the deal) = 74K (gross) - 50K principle = 24K net rev

This means that the ISO is making 72% on the money and the funder walks away with 48%

Is this a real / possible offer?

makes sense that someone will offer that with good deal flow . its basically paying 15 points

[Akanner]

The funder should only be paying 6k in commission since he only funded half the deal. The broker is paying himself 6k commission since he also brokered the deal and funded half of it.

What do you mean by:

"6K (participation to iso on the deal)
6K (iso participation on the deal) "

[ClearFund]

The funder should only be paying 6k in commission since he only funded half the deal. The broker is paying himself 6k commission since he also brokered the deal and funded half of it. "

Correct, syndicates pay themselves their part of commission as a syndicate. The rest of the breakdown checks out though.

[Michael I]

yup and most funders you syndicate with you pay the commission on the part you syndicate regardless that it goes back to you

[Akanner]

Correct, syndicates pay themselves their part of commission as a syndicate. The rest of the breakdown checks out though.

So then it makes perfect sense that the broker is getting the better end of the deal since they are getting paid 12k in commission while the funder isnt.

[Michael I]

So then it makes perfect sense that the broker is getting the better end of the deal since they are getting paid 12k in commission while the funder isnt.

6 k in commission technically.but it is all dependent on what the broker spent to get that deal .if he spent 10k than he is down 4k and funder did better if it cost him zero than he gets the better deal etc

[Dailyfrog]

The funder should only be paying 6k in commission since he only funded half the deal. The broker is paying himself 6k commission since he also brokered the deal and funded half of it.

What do you mean by:

"6K (participation to iso on the deal)
6K (iso participation on the deal) "

Math checks out im adding to the iso 12 and deducting 6 and then deducting 12 and adding 6 to the funder its the same thing

What im trying to figure out is, how is it possible that the broker is making 50% more then the funder (considering all revenue, commission and syndication rtr)?

It sounds like the funder is trying to fish the iso telling him storys he only pays $1.5 in nsf fees to his bank and no syndication fees because he doesnt pay for processing (claims its a super low fixed price?!) sounds too good to be true

All banks i know charge 25 - 35 in nsf fees and all ACH processors i know charge between 1% - 2% in processing fees.

It just sounds too good to be true

[Michael I]

Math checks out im adding to the iso 12 and deducting 6 and then deducting 12 and adding 6 to the funder its the same thing

What im trying to figure out is, how is it possible that the broker is making 50% more then the funder (considering all revenue, commission and syndication rtr)?

It sounds like the funder is trying to fish the iso telling him storys he only pays $1.5 in nsf fees to his bank and no syndication fees because he doesnt pay for processing (claims its a super low fixed price?!) sounds too good to be true

All banks i know charge 25 - 35 in nsf fees and all ACH processors i know charge between 1% - 2% in processing fees.

It just sounds too good to be true

to me it makes prefect sense.
1.you get deal flow and do not need to pay iso rep,bonuses etc.
2. having the iso in for 50% of a deal will 100% lower your default rate a ton.
3.plenty offer this just charge the 3% management so waiving that is equivalent to paying an15% which a lot of funders do now also.
4. there is technically 3 parties here. funder 1 funder 2 and the broker. in this scenario one person just happens to be 2 of the people but that is why the cm goes form the right pocket to the left