[WhoisKingsley]

It seems we have a common issue in the MCA space that needs to be addressed and feedback needs to be given.

If you are a BROKER (Whether you are a direct lender and have a brokerage house- or just a brokerage firm/ISO) and you decide to Sub-Broker files for other ISOs- Do you make sure that the ISOs you sign understand the services you are offering AND your commissions structure?

For the "Noobs" who use another company to sub-broker- understand that the further the money is, the more expensive, and the less commission you will receive because of the in between people you work with. Also, the lower the rate, the lower commission (duh). BUT that doesn't mean that the service offered is bad.

Example- Broker company tells you they are going to split commissions with you 50/50 - that means 50% of what they will be paid directly from the lender (duh) - which can mean a lower %. BUT what is more important? Satisfying the merchant or your pockets?

The more reputable and professional BUSINESS FINANCIAL SERVICE PROVIDERS know that giving the merchant what they need is more important than declining because of low commissions. Relationships grow off of quantity and quality work flow. How do you leverage sub-brokering? Do the companies/people you work with understand and stay after the first deal?

[jotucker1983]

Great post, I'm hoping that many chime in on this as well in relation to how they handle sub-brokers as well as their payment compensation.

I'm on the fence with someone being a sub-broker because if they are a sub-broker on all commission, that means they are spending their own capital to generate leads for the broker, in hopes that the broker closes them and then provides the cut.

This business is becoming less and less profitable due to the rush of people coming into the industry, and the first thing they do is start cutting prices without really focusing on value provided.

So I don't know how a sub-broker is supposed to even be profitable in this climate on all commission. I do, however, think that if someone has zero experience in this area that they should work under someone to train them, which might be all commission or with a hourly wage. But that should be very short term, perhaps 6 -12 months, it should give the new person time to learn the basics of the industry as well as how they will branch off with their own unique value proposition for this industry.

[Miller192]

We'll accept deals from other brokers on our CRE deals that we might participate in, but we won't co-broker anything. It's just not worth it.

[socalgav]

I send deals to other brokers all the time, if we cant get it done within our stable of lenders and they have relationships we don't, why not. Happy clients comes 1st. the rest will follow. half a loaf is better than no loaf

[loanranger]

I have alot of sub brokers underneath me and yes the loan is done based off of the merchants needs not on the money that can be made off of the merchant. If my sub brokers dont understand that they dont have to work with me. Also if they don't truly understand why i do that then i no longer want their business. My reputation is more important than crushing one merchant for an extra few hundred bucks.......

[TBurd]

Couldn't agree more with socalgav. We are a broker and we as well only do business with a few select lenders for multiple reasons. If we cannot get a deal done and make our client happy, we will look to a trusted broker partner who has the relationship that we don't to complete the transaction. Strong lender to broker relationships are vital in this industry and why would I send a deal to a lender we never work with, only to get poor pricing and long turn times? HOWEVER the key here is transparency with sub-broker deals, I am not saying all sub-brokers out there are good - you need to have a contract in place and a crap load of trust with that broker. We as well sub-broker for some ISO shops. Once we fund a deal for one of our ISO shops we sub-broker for we send them the commission email that was sent from the lender and we split it 50/50.

[jotucker1983]

I guess I just don't understand why a Broker doesn't have his Network established to have a particular lender (1-2) at each risk level hierarchy to address the particular needs of his client? There's only "so many" direct lenders in this space, how is it that another Broker could have a source that you never heard of?

This might make sense on the bankcard processing side, you will have your conservative ISO, your moderate ISO, and your high risk ISO. But because there's so many different ISOs in the space with random levels of underwriting criterion, you could also have a side relationship with an Agent that has relationships established with let's say 30 different ISOs and Banks in which you send files to that you can't get done within your network (saving you from having to partner with 30 different companies). Those deals you send to that Agent would be Sub-Agent deals.

But I don't see how one would need something like that for this space. There's only so many direct lending groups out there and their generic criteria, target markets, price levels and risk levels can be easily identified.

[cardinalequity]

John,

Outside of strong relationships with a lenders which helps you get better and faster service at times I do have one other reason why ISO's would sub-broker.

If you notice many posts on here you will see the following... Who does this? Who does that? Who can get this done? Can anyone fund a deal in Canada, etc
Now for the true newbie it's somewhat acceptable but really even the slightest effort to search this forum would give them the answers they seek.

I believe these people fall into 2 categories.

1. The DF moocher that doesn't want to study the industry and wants everyone to tell them everything and build their business for them. (IE What sales script do you use, what leads, what industries, etc)

2. The people who genuinely want to learn the business but sometimes deals need to close quickly and they don't have time to wait for a DF response for their deals. These people often times will see the temporary value of working with a seasoned broker. (6-12 months)

In my personal opinion and experience the ISO's that fall into category #2 usually are the ones who not only stick around long term but actually thrive. There is value in mentorship if you want to call it that.


FYI John I'm aware you made the below statement so I know you see the potential value in specific unique situations.


I do, however, think that if someone has zero experience in this area that they should work under someone to train them, which might be all commission or with a hourly wage. But that should be very short term, perhaps 6 -12 months, it should give the new person time to learn the basics of the industry as well as how they will branch off with their own unique value proposition for this industry.

I guess I just don't understand why a Broker doesn't have his Network established to have a particular lender (1-2) at each risk level hierarchy to address the particular needs of his client? There's only "so many" direct lenders in this space, how is it that another Broker could have a source that you never heard of?

This might make sense on the bankcard processing side, you will have your conservative ISO, your moderate ISO, and your high risk ISO. But because there's so many different ISOs in the space with random levels of underwriting criterion, you could also have a side relationship with an Agent that has relationships established with let's say 30 different ISOs and Banks in which you send files to that you can't get done within your network (saving you from having to partner with 30 different companies). Those deals you send to that Agent would be Sub-Agent deals.

But I don't see how one would need something like that for this space. There's only so many direct lending groups out there and their generic criteria, target markets, price levels and risk levels can be easily identified.

[jotucker1983]

Cardinal,

Yes, I agree and number two is a good point. To me, it appears as though too many people come under number one at times, where they are looking for another person "more experienced" to do the work for them as you laid out.

I think it depends though on where the person is in their career within this industry. If they are just starting out, I think they need to work under another broker for about a year to learn the basics, allow that broker to help them formulate their business plans, accounting sources, legal sources, capital sources, etc. and after a year they go out into the marketplace on their own running their own office.

I do know in this case it could seem as though the broker is "training his competition," but if he gets something out of it such as full residual/renewal ownership of the accounts the new guy boarded while employed under the broker, it might be worth it. Plus, the broker shouldn't teach them everything but instead function more as a mentor.

If the person has already been in this industry for awhile, then I think they ought to be at the point to where they understand the risk nature of the various applications they receive, and have 1-3 different sources lined up once they receive apps with those pre-qualified measures.

[cardinalequity]

Agreed!! Well said...

Cardinal,

Yes, I agree and number two is a good point. To me, it appears as though too many people come under number one at times, where they are looking for another person "more experienced" to do the work for them as you laid out.

I think it depends though on where the person is in their career within this industry. If they are just starting out, I think they need to work under another broker for about a year to learn the basics, allow that broker to help them formulate their business plans, accounting sources, legal sources, capital sources, etc. and after a year they go out into the marketplace on their own running their own office.

I do know in this case it could seem as though the broker is "training his competition," but if he gets something out of it such as full residual/renewal ownership of the accounts the new guy boarded while employed under the broker, it might be worth it. Plus, the broker shouldn't teach them everything but instead function more as a mentor.

If the person has already been in this industry for awhile, then I think they ought to be at the point to where they understand the risk nature of the various applications they receive, and have 1-3 different sources lined up once they receive apps with those pre-qualified measures.

[SteveFinServe]

Yes great post, I agree though that sometimes it's not worth it, but for "noobs" to get a half loaf that's better than none! There is more than one way to skin a cat.