[Thewolfofallstreetz]

Hello Everyone,

I’m new to this side of the industry. Prior I was a sales person so I didn’t see what went on behind the scene, I simply just got in files and sold what was presented to me. I recently started my own company. A deal I recently funded was a 3rd position with a lender I had never heard of before, but I see several people have mentioned working with them on DF before.

I sent them an incredible file that was doing anywhere from $500-750k per month in revenue, for a company that has over $2.5M on their 15-90 day AR

Anyways they charged me a 10% origination fee which my client was happy about, I usually charge an additional PSF but with the lender charging 10% for origination I had no room. I got them to negotiate it down to 7%.

To my knowledge this was rather high for an origination fee and I felt as if the lender was taking advantage of me and the situation since I am new.

Is it normal for lenders to charge a 10% origination fee on 3rd positions or did they take advantage of me?

[DailyCloser]

LOL!

So this said lender pays you 10-15 points and you're upset because because you couldn't charge your merchant an extra fee because the lender took advantage of you?

You negotiated the fee by 3 points lower not to help the merchant, but to make 3 extra points yourself.. Sounds like you're the one that's trying to take advantage. If I were this lender I would cut you off after reading this.

[Thewolfofallstreetz]

Unfortunately I didn’t charge the additional 3 points, this particular client never paid more than 3% on their PSF and I found it odd the lender was asking 10% for origination and was quick to drop it down to 7%. It was sold at a 1.49 and I only made 4 points because turns out I went through another broker who said they were a direct lender and ended up being a broker. To be clear the MCA contract originally had 10% origination fee and I got them to drop it to 7%.

If my client wasn’t in need of needing to make payroll I would have found another lender but I just didn’t have time because I had a deadline to meet.

What I’m trying to find out is if 10% origination fee is a typical fee charged by lenders or are they the ones being greedy? I personally felt them originally charging 10% origination was greedy.

[brokerCompany]

Hello Everyone,

I’m new to this side of the industry. Prior I was a sales person so I didn’t see what went on behind the scene, I simply just got in files and sold what was presented to me. I recently started my own company. A deal I recently funded was a 3rd position with a lender I had never heard of before, but I see several people have mentioned working with them on DF before.

I sent them an incredible file that was doing anywhere from $500-750k per month in revenue, for a company that has over $2.5M on their 15-90 day AR

Anyways they charged me a 10% origination fee which my client was happy about, I usually charge an additional PSF but with the lender charging 10% for origination I had no room. I got them to negotiate it down to 7%.

To my knowledge this was rather high for an origination fee and I felt as if the lender was taking advantage of me and the situation since I am new.

Is it normal for lenders to charge a 10% origination fee on 3rd positions or did they take advantage of me?

You sure it was a direct "lender" charging 10% origination fees? never had that with any of our funders, but then again we dont co broker deals

[Thewolfofallstreetz]

Yes, the direct lender was charging 10% on the origination. From the merchants perspective I was the broker they sent me the contracts and I reviewed with them through Zoom and I saw the 10% fee on the MCA contract which I requested through the actual broker to drop it and it was changed to 7%.

I admit I messed up on my end through co brokering it that wasn’t my intentions and I was mislead. Anyways I learned my mistake and I’m not working with that individual anymore.

[MJames]

10% is common for higher risk, shorter term deals, and 3rd-6th position offers.

[mcafunders]

Fairly normal to charge or at least have 10% on docs
if merchant has an issue they can easily shave off a few % to get deal done and make everyone happy
this is usually for smaller high risk companies - (not your ebf, delta, mantis, cfg type - their fee is typically set and smaller)

as said before your making a risk-free commission. funder takes risk and pays you up front

[iwantyourpaper]

Hello Everyone,

I’m new to this side of the industry. Prior I was a sales person so I didn’t see what went on behind the scene, I simply just got in files and sold what was presented to me. I recently started my own company. A deal I recently funded was a 3rd position with a lender I had never heard of before, but I see several people have mentioned working with them on DF before.

I sent them an incredible file that was doing anywhere from $500-750k per month in revenue, for a company that has over $2.5M on their 15-90 day AR

Anyways they charged me a 10% origination fee which my client was happy about, I usually charge an additional PSF but with the lender charging 10% for origination I had no room. I got them to negotiate it down to 7%.

To my knowledge this was rather high for an origination fee and I felt as if the lender was taking advantage of me and the situation since I am new.

Is it normal for lenders to charge a 10% origination fee on 3rd positions or did they take advantage of me?

I have def seen 10% from other funders in the high risk space. We're well below that on our deals.

[goatFunding]

Fairly normal to charge or at least have 10% on docs
if merchant has an issue they can easily shave off a few % to get deal done and make everyone happy
this is usually for smaller high risk companies - (not your ebf, delta, mantis, cfg type - their fee is typically set and smaller)

as said before your making a risk-free commission. funder takes risk and pays you up front

Risk-free commission?

He has overhead.. he paid for that lead.. he worked to get that merchant to accept the 1.49.....

blah blah brokers are terrible blah blah...


some funders are just entitled.. morbidly obese hogs ... bursting out of their sweatpants ... and just do not understand the hustle, and cost it takes for that file to get in front of them.

[BR-Nightmare]

Risk-free commission?

He has overhead.. he paid for that lead.. he worked to get that merchant to accept the 1.49.....

blah blah brokers are terrible blah blah...


some funders are just entitled.. morbidly obese hogs ... bursting out of their sweatpants ... and just do not understand the hustle, and cost it takes for that file to get in front of them.

Bruh......

We both take risks, mine is just a bit bigger.......

Not all brokers are bad, some just have a hard time understanding our side too. Last time I checked, many funders reward you with bonuses, more points after "X" amount is met. Even if you're slapping it 15 points and a PSF.

Point blank, the risk is on both sides. WE are both taking a risk on a business to pay, or at least reach a renewal.

[pcfunder]

The funder might have noticed something that made the deal riskier. How quickly is the merchant stacking up? We don't charge 10% on a clean 3rd but if merchant took out 2 positions within a very short time span and is looking for a 3rd chances are they will be looking for a 4th, then a 5th, then a 6th, etc.... Maybe background or credit had something as well? What was the term on the deal?

[Michael I]

half the time its the iso rep that is the one jacking up the fee for himself

[mcafunders]

Risk-free commission?

He has overhead.. he paid for that lead.. he worked to get that merchant to accept the 1.49.....

blah blah brokers are terrible blah blah...


some funders are just entitled.. morbidly obese hogs ... bursting out of their sweatpants ... and just do not understand the hustle, and cost it takes for that file to get in front of them.

Do you know what risk free means?

its means that they are not risking their money in what may potentially be a dud file and lose all their money.

Yes the broker has costs and has to work BUT that is not risk.

Last time i checked brokers and broker shops build their way up.

They dont "risk" tens of thousands of dollars day one on massive offices, furniture, computers, crm leads, etc.
i would imagine they start off small and slow build out a large team as they see return on investment (commissions) comming in constantly to cover growth.

So ya, there is not risk. the risk is on a funder who funds a deal, be it 20k or 200k

[mcafunders]

half the time its the iso rep that is the one jacking up the fee for himself

An alternative is the rep downselling the broker their commission - rather it come out of the merchant or the broker commission?

remember- everyone wants to get paid

[UptownFund]

Yes.

10% is standard if the risk calls for it.

I find being a successful broker is towing the line carefully about caring more the funder than the merchant.
Every "client" will cheat on you, don't think for a second that he's your "client".

And pulling a psf and calling the funder greedy... come on.

[goatFunding]

Do you know what risk free means?

its means that they are not risking their money in what may potentially be a dud file and lose all their money.

Yes the broker has costs and has to work BUT that is not risk.

Last time i checked brokers and broker shops build their way up.

They dont "risk" tens of thousands of dollars day one on massive offices, furniture, computers, crm leads, etc.
i would imagine they start off small and slow build out a large team as they see return on investment (commissions) comming in constantly to cover growth.

So ya, there is not risk. the risk is on a funder who funds a deal, be it 20k or 200k

sounds like you are the underwriter I described... "I would imagine" AKA you have no clue what goes into brokering... point proven.


The fact you don't think brokers have risk, says it all.

[BR-Nightmare]

sounds like you are the underwriter I described... "I would imagine" AKA you have no clue what goes into brokering... point proven.


The fact you don't think brokers have risk, says it all.

If your overhead is so high your 15 point commission cant provide any profits, then somethings off there buddy.

[mcafunders]

sounds like you are the underwriter I described... "I would imagine" AKA you have no clue what goes into brokering... point proven.


The fact you don't think brokers have risk, says it all.

so explain to me the risk.....
hard work and grind i understand

and your description is way off.

Sounds like you think all funders are scummy and just rip ppl off all day long.

[Steven_O]

If a "funder" has to charge 10% origination, they're the problem with this industry.
If a broker is charging 10% PSF on top of their already earned commission, they are double dipping and they're the problem with this industry.

Any excuses can be made:
- "the deal could go bad and the funder is left in the cold"
- "the deal could go bad and the broker needs to protect their commission earned"
- "the client was high risk"

It all boils down to greed.

If the client didn't pass UW, or too high risk - kill it.
If the broker is worried about claw backs - don't count your money till your out of claw back season OR, don't take the file.

Pointing the fingers at each other is all fake news.

And making the business "pay for it" is only an excuse. No one gets refunded the extra fees if they pay on time.

Everyone is out here for the dollar. Don't twist it.

There I said it.

[BR-Nightmare]

so explain to me the risk.....
hard work and grind i understand

Lead, Internet, Hardware, Lease, Employees, Insurance, Utilities.

We have pretty much the same overhead with the exception of the leads.

Yet I'm suppose to be at the Brokers mercy 100% of the time? The Broker says jump, I have to simply say "yes sir?

As I always tell the brokers I deal with, work WITH me.

Work with me and I will try to get this deal done, if it's not a good fit, its not a good fit.

[pcfunder]

Lead, Internet, Hardware, Lease, Employees, Insurance, Utilities.

We have pretty much the same overhead with the exception of the leads.

Yet I'm suppose to be at the Brokers mercy 100% of the time? The Broker says jump, I have to simply say "yes sir?

As I always tell the brokers I deal with, work WITH me.

Work with me and I will try to get this deal done, if it's not a good fit, its not a good fit.

I think it has something to do with the way sales reps are trained. They are trained to be aggressive go getters who believe they can make anything and SHOULD make anything happen even if it means putting a funder into a bad deal or getting a merchant into a bad program. Definitely should rewire a few of those principles at some point more sales managers/brokerage shop owners should teach their reps that the funder is a relationship and you'll make more money if you build a better relationship with them. We have ISO's who try to screw us all the time and I can confidently say they make close to 0 dollars with us while other ISO's who are clearly on our team make 100k+ a year with just us and we help them win a lot of deals by getting their merchants into unbeatable programs.

[mistamca]

sounds like you are the underwriter I described... "I would imagine" AKA you have no clue what goes into brokering... point proven.


The fact you don't think brokers have risk, says it all.

There is no such thing as a risk-free business. But if you want to compare apples to apples, then a broker's risk-adjusted return is much, much better than a small funder.
The biggest risk as a broker is that your CPA is more than the commission.
Don't get me wrong, I have been stolen from more than once and that sucked but from a risk/cost POV, I got way bigger issues.
The problem with this industry is that the barrier to entry is pretty much non-existent. Aside from relationships, you can start a broker shop for a couple hundred bucks. To start a funding shop, you will need a minimum 1.2mm to have a "healthy" portfolio

I am building a new broker shop right now (not in this space) and I'll be shocked if I spend 25k before I make my initial investment back. Honestly, Ill probably be making the 2nd most (PM%) in the transaction where there are 4+ parties. Why? CONSISTENT SALES AND MARKETING IS HARD AND EXPENSIVE.

[goatFunding]

Lead, Internet, Hardware, Lease, Employees, Insurance, Utilities.

We have pretty much the same overhead with the exception of the leads.

Yet I'm suppose to be at the Brokers mercy 100% of the time? The Broker says jump, I have to simply say "yes sir?

As I always tell the brokers I deal with, work WITH me.

Work with me and I will try to get this deal done, if it's not a good fit, its not a good fit.

I am not arguing. Funders have a ton of risk. (I personally syndicate in most deals I broker... I know what deals going bad looks like) .... I'm with you brokers should respect the funders that respect them, and value what they bring to the table.

Both sides should realize they are not g-d... You bring some value, but the person on the other end of the phone does too.....

[goatFunding]

Bruh......

We both take risks, mine is just a bit bigger.......

Not all brokers are bad, some just have a hard time understanding our side too. Last time I checked, many funders reward you with bonuses, more points after "X" amount is met. Even if you're slapping it 15 points and a PSF.

Point blank, the risk is on both sides. WE are both taking a risk on a business to pay, or at least reach a renewal.

agreed

[mcafunders]

I am not arguing. Funders have a ton of risk. (I personally syndicate in most deals I broker... I know what deals going bad looks like) .... I'm with you brokers should respect the funders that respect them, and value what they bring to the table.

Both sides should realize they are not g-d... You bring some value, but the person on the other end of the phone does too.....

fair enough !