[Zach]

If you don't position it well, then yes. It's key to know the merchant's other options before the negotiation phase.

To me the greater risk is all of the money left on the table by merchants that would have been willing to pay more.

One 12-point deal for 100K is worth the same as three 4-point deals.

Plus, you can always back down on rate or fees (unless you push too hard).

[AndyYSCISOdept]

If you don't position it well, then yes. It's key to know the merchant's other options before the negotiation phase.

To me the greater risk is all of the money left on the table by merchants that would have been willing to pay more.

One 12-point deal for 100K is worth the same as three 4-point deals.

Plus, you can always back down on rate or fees (unless you push too hard).

Okay, here are two issues I see.
1. Knowing the merchants other options - Someone told me a long time ago two things are guaranteed merchants lie and brokers lie to merchants.
2. Backing down on the fee or the rate - I have found that a lot of times going to high off the bat never allows you to get to the point of "backing down" because, and this is from the merchants I have spoken with about this issue, they feel like the broker tried to take them to the cleaners instead of giving them the best option possible upfront.

[ridextreme]

Today people are constantly shopping and getting multiple quotes at the same time. I quote based on their credit, how eager they are to get funded, how good or bad their banks look, other recent mca inquiries, and if they are "rate conscious" (when they constantly ask me what the rate is from day one).

I don't think it's wise to start high 100% at the time.

[FUNd]

No, it's always smart to max out every deal and go in with fees on top of fees on top of uber high rates. Keep doing that. It's smart business.

[AndyYSCISOdept]

Lol.

[ridextreme]

Ooooooh is that why I have a stack of approvals that said they'll get back to me but they don't pick up and they dropped off the face of the earth?

[MCNetwork]

I recommend to always quote all of your deals with a 10% origination fee and the maximum allotted commission, and subsequently negotiate from there.

This tactic may have worked in 2008 but in today's competitive climate it won't get you far. You have to know your audience and tailor your pitch for each merchant. For example, you won't go in guns blazing hot with full commission and fees if you're dealing with a 780 FICO merchant with a great business. On the other hand, if your merchant has a 480 FICO and just got out of bankruptcy, that's a different story...

[FUNd]

Yeah, ridextreme, they're just thinking about it. They don't feel taken advantage of at all. After all, they're just dumb hillbillies from Bum****, GA with no business sense. We, after all, are rich, educated city folk. They'll call back.

After all, a 1.459 with a 10% "bank fee" and a $1250 in ACH program fees, underwriting fees, high risk fees, UCC fees, and the like is standard practice.

[AndyYSCISOdept]

alright alright I was just trying to point out that in todays saturated market when the company du jour is offering "the best rates known to man" etc etc you can't sit there and convince merchants to take your additional fee so easily. And if they do take it the warning bells should probably be going off. But hey, who cares if my commission doesn't get clawed back right?

NOTE: Funders are as much to blame as brokers, I am not suggesting otherwise.

[FUNd]

Yes, Andy we just talked about this. Why are you guys against broker fees when you guys are PIGS on lender fees?!

[Zach]

All of the top reps in every company I've seen, managed, or worked for have extremely high point averages. It's classic negotiation theory to start with the maximum possible gain and work down from there.

I understand it's not the current, popular trend of thought, but it does indeed work and is the most effective strategy for maximizing revenue (next to syndication). Dropping price is best done only when necessary. Most new reps immediately drop price rather than standing strong and attempting to justify a higher rate.

With sufficient sales ability you will usually not "price yourself out" of a deal. Just don't back yourself into a corner with phrases like:

"that's the best we can do"

or

"there isn't a better option out there"

Also, don't let them off the phone until you've confirmed the terms with them. Unless they agree that they will sign the paperwork immediately while you wait, you have a problem to defuse. This is where the negotiation typically begins.

[BigIz]

I recommend to always quote all of your deals with a 10% origination fee and the maximum allotted commission, and subsequently negotiate from there.

Zach, just to be clear because I am new. Are you saying for me to quote a 10% broker fee for me on top of the 8% commission?

[AndyYSCISOdept]

Yes, Andy we just talked about this. Why are you guys against broker fees when you guys are PIGS on lender fees?!

Hey man, we did just talk about this and what did I say about lumping me in with that "you guys" stuff? LOL I get what you're saying though and that's what I was getting at earlier when I was talking about my efforts to make sure those fees are as limited as I can make them. But as a funder, I'm not cutting my fees down to ZERO and chopping my factor to make it easier for the broker to sell his 10% fee.

[Zach]

Zach, just to be clear because I am new. Are you saying for me to quote a 10% broker fee for me on top of the 8% commission?

If the lender allows it and you understand how to sell it, then that is indeed the best way to maximize revenue.

Of course, there is a separate, moral argument to be made, however I'd rather not discuss ethics on this board.

[Zach]

Okay, here are two issues I see.
1. Knowing the merchants other options - Someone told me a long time ago two things are guaranteed merchants lie and brokers lie to merchants.
2. Backing down on the fee or the rate - I have found that a lot of times going to high off the bat never allows you to get to the point of "backing down" because, and this is from the merchants I have spoken with about this issue, they feel like the broker tried to take them to the cleaners instead of giving them the best option possible upfront.

#1: Check the credit report for competitor pulls and ask the client about them. Say that you need to know what offer they presented so you can be as effective as possible for them. Ask them why they didn't move forward on that offer.

#2: It is certain that you will lose some deals by employing this strategy. However, the deals that close will be much higher revenue, which will cover any deals you may have lost (and leave you with a net gain).

[BigIz]

If the lender allows it and you understand how to sell it, then that is indeed the best way to maximize revenue.

Of course, there is a separate, moral argument to be made, however I'd rather not discuss ethics on this board.

Thanks Zach. I am not necessarily against adding a "Broker" fee when the commission is low and the Lender allows it but my issue with this was twofold.

How do I set up the ACH pull and stay compliant with State statutes that may affect my "broker agreement" with the merchant.

Yeah, I know, I hire an attorney.

I had contemplated using Funding Circle on some term deals because of their rates compared to Loan Me and adding 6.5% commission on top of their 1.5% (quoting the merchant a total origination fee of 9.99% up front) but had not because of my two issues above.

[MCNetwork]

This is an unregulated industry so I don't know what State statutes you're referring to. As far as I know, you simply have to draft a letter authorizing the fee and have the merchant sign it. This is the proof you will present to your ACH processing company if the merchant tries to dispute the charge. There's no need to hire a lawyer for this.

[BigIz]

This is an unregulated industry so I don't know what State statutes you're referring to. As far as I know, you simply have to draft a letter authorizing the fee and have the merchant sign it. This is the proof you will present to your ACH processing company if the merchant tries to dispute the charge. There's no need to hire a lawyer for this.

Hello MCNetwork, should have been clear. I was only thinking of adding a broker fee when I get the merchant into a term loan (if the lender allows it) because they want a larger amount for longer terms. The term lenders are actual lenders that are licensed on a State by State basis. Me charging a "referral" or "broker" fee may violate State statutes.

From the ISO agreements I have gotten from the term lenders, they only pay around 1.5% to 3%. I had already decided that I would not get a merchant into a term loan if they wanted anything under $100,0000 and the lender did not allow me to charge an additional broker fee. I cannot be profitable or break even if I make $750 on a $50,000 deal.

[Chambo]

One 12-point deal for 100K is worth the same as three 4-point deals..

That's rookie BS. three deals are far more valuable, as you now have three potential renewals, which will net you more money down the road.

Who's a better ball player? The one who hits .225, but hits 35-40 HR's, or the guy who only hits 6-10 HR's, but bats .350?

[Chambo]

Zach, just to be clear because I am new. Are you saying for me to quote a 10% broker fee for me on top of the 8% commission?

Yeah, if you want to close 2-3 deals a month

[brokerCompany]

Most term lenders like FC and Dealstruck dont allow additional broker fees. So best of luck trying to get it done with them. They are good for the $150k+ deals for well qualified merchants who would laugh at a 1.39 offer and 10% broker fees.
10% ISO fee is just plain greedy and for real desperate or duped merchants. I guess that is why a lot of merchants shop and find the broker that does not charge those fees.
Regardless of the opinion on this, the board has become a great source for merchants and they can find out a lot about the company or broker they might work with..

[Zach]

That's rookie BS. three deals are far more valuable, as you now have three potential renewals, which will net you more money down the road.

Who's a better ball player? The one who hits .225, but hits 35-40 HR's, or the guy who only hits 6-10 HR's, but bats .350?

Interesting comparison. Why would 3 renewals at 4 points be more valuable than 1 renewal at 12? I understand for a syndication portfolio it is more valuable to have diversified risk, but why would it make any difference for a broker, seeing how it is the exact same revenue with less work?

[Chambo]

Interesting comparison. Why would 3 renewals at 4 points be more valuable than 1 renewal at 12? I understand for a syndication portfolio it is more valuable to have diversified risk, but why would it make any difference for a broker, seeing how it is the exact same revenue with less work?

That's what you get for thinking in the here and now, as opposed to 4-6 months down the line

[Zach]

That's what you get for thinking in the here and now, as opposed to 4-6 months down the line

How do you mean?

Our renewal rate is through the roof because we can just drop points and secure it (since we sold it high, it's easy to come down and win the business again). Not only do we make more on the front, but also on the back. I think my model might be more effective than what you're referring to.

[BigIz]

Most term lenders like FC and Dealstruck dont allow additional broker fees. So best of luck trying to get it done with them. They are good for the $150k+ deals for well qualified merchants who would laugh at a 1.39 offer and 10% broker fees.
10% ISO fee is just plain greedy and for real desperate or duped merchants. I guess that is why a lot of merchants shop and find the broker that does not charge those fees.
Regardless of the opinion on this, the board has become a great source for merchants and they can find out a lot about the company or broker they might work with..

Funding Circle allows you to charge a broker fee if you sign up on their 1.5% commission rate program (they give you 1.5% of their 3.49% origination fee). So you are saying I am greedy if I want to make a total of 8% on the deal?

Dealstruck pays 2% (3% if you close 5 deals) AND allows you to charge up to an additional 2% broker fee. So am I also being greedy if I make 5% on a deal?

I do not think me wanting to make 5%-8% TOTAL on a deal is greedy.

Do you not have an office with overhead? What about the outrageous cost of lead acquisition?

I understand 15%-20% but 5%-8%?