[simonwein12]

Brokers- Be honest.

Do you PSF a majority of the time or not?

I personally am not ok with it unless it’s a specific situation. In most cases where brokers are making 10-15 points, it’s just greedy.

[FCF Fund]

Brokers- Be honest.

Do you PSF a majority of the time or not?

I personally am not ok with it unless it’s a specific situation. In most cases where brokers are making 10-15 points, it’s just greedy.

Yes, with respect to increasing marketing and labor costs, any bit helps. Now, not advocating a 10% fee, but a tier based system with nominal fees helps. Just like funders charge 5-10% of fees AND the factor.

[ridextreme]

In most cases where brokers are making 10-15 points, it’s just greedy.

So it's not greedy for a funder to charge a 3 point "origination fees" then?

[simonwein12]

So it's not greedy for a funder to charge a 3 point "origination fees" then?

Its a totally different equation... The funder has a totally different set of factors and risks. Brokers have 0 risk other then their claw-back which is only 30 days. After default rate, the brokers make more on many deals then the funder with their 10-15 points.

[brokerCompany]

Keeps trying to charge those PSFs on MCAs. I dont have to since a small shop and I often take deals from those who charge add fees. So yeah keep trying and good for you when you get a gullible clients that signs off on you 5%+ fee.

[closer129]

For brokers to charge a psf is ok as long as it is reasonable to the deal. Selling a deal making 10-15 points then charging a 10% fee on top of that is not good. You are making the money even more expensive for the merchant and making more money than the funder that is taking the risk and waiting several months to get there money back. If the deal defaults within the crawl back period and the broker does payback the commission they just lost the money they did not have if the deal was declined and keeps the 10% psf yet the funder looses there money.

Funders that charge a 10% origination fee are the chop shops of the industry that only deal with high risk files that other funders do not want and want to take advantage of merchants which is wrong. Funders that charge 2-5% depending on the risk of the file is fine. We have to cover the cost of the broker in the factor rate all the defaults that happen and the fees involved to go after defaults. We also have to cover all the credit reports and background searches for all the deals that get funded and not funded. We need to cover the cost of all operations salary the reps compensation. Every institution that provides funding charges and orgination fee to cover background cost.

[simonwein12]

Funder overhead is much more expensive then broker overhead- its not comparable

[super]

I personally do not charge a psf .If funders really wanted no psf fees they should get rid of clawbacks and no broker would ever charge a psf.

[MichaelP]

We currently don't charge PSF's, but if the funder is aware of it as well as the merchant(beforehand) then it doesn't matter how many points are offered from the funder. Putting a judgement like Greedy on it, may or may not be true. Depending on the size of the specific deal and costs of marketing. There are plenty of times on small deals that don't renew where I lose money based on CPS for that week or month which can fluctuate.

[goatFunding]

Its a totally different equation... The funder has a totally different set of factors and risks. Brokers have 0 risk other then their claw-back which is only 30 days. After default rate, the brokers make more on many deals then the funder with their 10-15 points.

Classic comment from a funder who doesn't understand what running a successful broker shop entails

[simonwein12]

Classic comment from a funder who doesn't understand what running a successful broker shop entails

Most funders think like me and are not going to be as aggressive with brokers who take PSF on every deal....

[SendDocsPlox]

Yes.

[Michael I]

Funder overhead is much more expensive then broker overhead- its not comparable

than why not broker instead of funding ? there is a reason funders pay 15 points instead of just bringing in all the deals themselves . because it is cheaper for them

[BIG]

We generally don't like it when brokers charge PSFs on deals we fund. As a funder you want to work with ISOs that are mutually respectful and try to nurture a relationship with the merchants, not that squeeze every penny out of them,

than why not broker instead of funding ? there is a reason funders pay 15 points instead of just bringing in all the deals themselves . because it is cheaper for them

[simonwein12]

We currently don't charge PSF's, but if the funder is aware of it as well as the merchant(beforehand) then it doesn't matter how many points are offered from the funder. Putting a judgement like Greedy on it, may or may not be true. Depending on the size of the specific deal and costs of marketing. There are plenty of times on small deals that don't renew where I lose money based on CPS for that week or month which can fluctuate.

Just because some deals don’t renew doesn’t mean that it makes financial sense to PSF on deals. All your doing when you then decide to PSF is guaranteeing that less deals renew- which actually makes you less money in the long run…

[simonwein12]

I truly don’t understand the logic behind charging PSF fees. why on earth would you jeopardize countless renewals (which are the real money makers) to make a quick 5% fee? I have brokers who have literally made hundreds of thousands of dollars on one deal from renewing it over and over.

[Michael I]

I truly don’t understand the logic behind charging PSF fees. why on earth would you jeopardize countless renewals (which are the real money makers) to make a quick 5% fee? I have brokers who have literally made hundreds of thousands of dollars on one deal from renewing it over and over.

do you allow your iso rep to charge a fee ? I realized that most funders are a 3% fee and when they charge 5-10% it is the iso rep charging his own psf fee to split with house ?

[pcfunder]

do you allow your iso rep to charge a fee ? I realized that most funders are a 3% fee and when they charge 5-10% it is the iso rep charging his own psf fee to split with house ?

Definitely not the case with anyone I'm aware of. My company tries charging fee's based of how much they think that specific type of paper will default overall. Meaning if its a 10% fee then they expect a larger number than normal of defaults and if its 3-5% fee then they find it will be minimal defaults. No matter whether its 3, 5, or 10 I still get paid the same over here. Actually a lot of the times I get paid less if the fee is lowered or the rate is lowered because I try to give my ISOs more commission but I never get paid more than what is agreed upon between me and my company.

[MichaelP]

Just because some deals don’t renew doesn’t mean that it makes financial sense to PSF on deals. All your doing when you then decide to PSF is guaranteeing that less deals renew- which actually makes you less money in the long run…

The statement you just made does not logically follow. I was referring specifically to a small deal that does not renew. As an example your CPS on that deal could be $1,800 and the the commission paid to you could be $1,200. In this hypothetical example it's objectively true that charging a PSF WOULD make financial sense. Just to be clear I stated that my shop doesn't charge PSF's, but saying that it doesn't make financial sense as a black and white blanket statement is foolish.

[simonwein12]

do you allow your iso rep to charge a fee ? I realized that most funders are a 3% fee and when they charge 5-10% it is the iso rep charging his own psf fee to split with house ?

1. I dont have ISO reps- My ISOS deal directly with an underwriter. However even if i did- ISO reps do not get paid from the merchant. The Syndicators/ Company pays them.

2. I said in my original post that I am not ok with it unless its a Specific situation

[Michael I]

You will be surprised how many funders let their iso reps ( not the broker ) charge a fee

[FCF Fund]

Its a totally different equation... The funder has a totally different set of factors and risks. Brokers have 0 risk other then their claw-back which is only 30 days. After default rate, the brokers make more on many deals then the funder with their 10-15 points.

0 risk other then marketing costs in OPEX? Marketing costs are getting higher, can be $50 just for a click with Google ads on 1st page, just a click, that doenst mean it turns into a lead, or a submissions or even a funded deal.

Now extrapolate that with buying leads from vendors, training, payroll and software costs I would argue ISO have plenty of risk that could make or break them besides a clawback.

[NotALoan]

0 risk other then marketing costs in OPEX? Marketing costs are getting higher, can be $50 just for a click with Google ads on 1st page, just a click, that doenst mean it turns into a lead, or a submissions or even a funded deal.

Now extrapolate that with buying leads from vendors, training, payroll and software costs I would argue ISO have plenty of risk that could make or break them besides a clawback.

That just sounds like your overhead/cost of doing business. That's not equivalent to lending out tens or hundreds of thousands of dollars sight unseen.

[FCF Fund]

That just sounds like your overhead/cost of doing business. That's not equivalent to lending out tens or hundreds of thousands of dollars sight unseen.

Risk is risk. My response was geared toward OP stating there is 0 risk for ISO other then clawback. There is risk for both sides, so fees (whether funder origination fees or PSF) compensate that risk.

[simonwein12]

Risk is risk. My response was geared toward OP stating there is 0 risk for ISO other then clawback. There is risk for both sides, so fees (whether funder origination fees or PSF) compensate that risk.

What you are talking about isn’t risk.... it is overhead and high costs that aren’t connected to the funding of /performance of a deal. Brokers only have operational risk- Funders have performance risk as well.

I am reffering to a case of charging a PSF when you are already making your points. you are not offsetting or lowering risk by charging a PSF. Pulling a Psf as well in case of 30 days clawback is a luxury that funders don’t have…if a Deal goes bad it’s a loss no matter what.