[MCABroker]

Has anyone heard of a change in policy where they only pay on the net amount? Got super skimped on a commission and when I called up they threw the fact that we only funded 1 file this year that renewed twice for over 1.2M in total funding and that they had to waive the setup fee for the merchant.

This is the problem when funders try to take control of the negations directly with the merchant and try to cut out the broker.

Its a slap in the face when funders pull this stunt on renewals. Commission when from 42k to 12k on the renewal to 4k on the last one... why would we even bring these type of files if you're going to try to screw the brokers on the re ups?

[jbrown]

This is not a change, this has been our policy since 2009. This is in your contract. We also sent you a reminder email on August 3 that the commission on the renewal was on the net, not the gross, and we also called you as a reminder. Our BD department can send you that email if you need it. Sorry if this doesn't work for you, we certainly understand if you feel you have better options for large files, as this one was. If you have any questions call Maria or TJ at our office.

[fund it]

This is not a change, this has been our policy since 2009. This is in your contract. We also sent you a reminder email on August 3 that the commission on the renewal was on the net, not the gross, and we also called you as a reminder. Our BD department can send you that email if you need it. Sorry if this doesn't work for you, we certainly understand if you feel you have better options for large files, as this one was. If you have any questions call Maria or TJ at our office.

i think thats what hes doing.

warning ISOS not to fund with you cause you will rip them off on the renewal commissions

[NoBigDeal]

i think thats what hes doing.

warning ISOS not to fund with you cause you will rip them off on the renewal commissions

How is it being ripped off, if this was signed and agreed upon by the ISO when they initially set up with Rapid or any funder for that matter? jbrown is saying this has been their policy since 2009

[J.Celifarco]

i think thats what hes doing.

warning ISOS not to fund with you cause you will rip them off on the renewal commissions

This is on the ISO not the bank.. The ISO signed an agreement before setting up with the bank which had a schedule of commissions in it. You cant then complain after the fact that you dont like what you agreed to.

[mcaguru]

This is on the ISO not the bank.. The ISO signed an agreement before setting up with the bank which had a schedule of commissions in it. You cant then complain after the fact that you dont like what you agreed to.

I agree with you John.

However At times funding companies should go beyond agreements and help the hard working ISO's.. Lets just take 1 example many funding houses have clawbacks when deal goes bad yet many hardly execute a clawback...the list of examples can go on....

[NoBigDeal]

Lets just take 1 example many funding houses have clawbacks when deal goes bad yet many hardly execute a clawback

What are you basing this off of? Do you have a list of the many funding houses that don't execute clawbacks? If so, I'd love to know why I haven't been doing business with them until now

[mcaguru]

What are you basing this off of? Do you have a list of the many funding houses that don't execute clawbacks? If so, I'd love to know why I haven't been doing business with them until now

We have an alliance of funding companies and I am tight with 75% of the CEO's of other funding companies, when we chat its always one of my many questions.

[NoBigDeal]

We have an alliance of funding companies and I am tight with 75% of the CEO's of other funding companies, when we chat its always one of my many questions.

So, I ask again, for the names of funding companies that don't enforce clawbacks

[HDF]

We have an alliance of funding companies and I am tight with 75% of the CEO's of other funding companies, when we chat its always one of my many questions.

Who is in your "alliance"? And why do they allow co-brokers like you in?

[mcaguru]

What are you basing this off of? Do you have a list of the many funding houses that don't execute clawbacks? If so, I'd love to know why I haven't been doing business with them until now

That i wont disclose, because for them its a case by case but i am certain others can come on here and will share that its a fact that at times funding companies don't exercise claw-back clauses. If my Australian family for example comps free hotel rooms when someone complaints does not mean they want me to advertise that they give free rooms to complainers.

[mcaguru]

https://www.commercialfinancecoalition.com/about-cfc/

[bizfundingfinder]

Incidentally, I'm dealing with this issue right now with another funder.

Paying an ISO even a penny less than full commission on the full funded amount on a renewal is not only a bad policy, it's completely idiotic.

Ignoring the fundamental mathematics for a moment, which I'll address below, why on earth would you create a disincentive for your brokers to renew performing merchants with you and keep them on your books!?

It's my merchant; if he needs more money, I can take him anywhere. I can get him the same or better deal than what you're offering, and I can probably make more money in the process, even if you're paying me my full commission. Remember, my sole objective as a broker is to shop for the best possible deals for my merchants while maximizing my revenue in the process.

But hey, I'm a relationship guy. And I also like the path of least resistance. You did right by me the first time around, so sure, I'll let you renew him. Nothing like a sure thing, right?

But wait... did I get this right? You want to pay me a reduced commission? Either by flat out paying a lower percentage, and/or by paying me based on what the merchant nets?!? What the flippity-f@&k is that all about?

What it ultimately boils down to is pure, unadulterated, disgusting, pig-stinky greed on the part of the funder, that's what it is. It's the funder simply getting over on the broker to increase their return. There is absolutely NO justifiable excuse for paying less on a renewal. And in fact, when you look at the math, a funder should actually pay MORE on a renewal.

Assume the funder gave your merchant an initial advance of $10,000/1.40/132 and paid you 10% commission. And let's give them the benefit of the doubt and assume they charged a "modest" 3% in fees. So when you add commission and deduct fees, they laid out $10,700 to yield $14,000, which works out to an ROI of 30.84%, and an annual percentage yield (APY) of 61.68% (because it's a six month term).

They also did a lot of initial underwriting up front. This is the first time they funded this merchant. They didn't know him from a hole in the wall. The did all the credit checks, background checks, lien/judgment searches, site inspections, the whole nine... they invested a lot of time and energy into deciding whether or not they want to take on the risk of funding this merchant. This needs to be factored into the equation, as it ultimately affects the ROI.

Now, three months into the deal you get an email from the funder telling you the "great news" - your merchant is 50% paid down and eligible for a renewal. Just have him update Decision Logic, sign an addendum, and they'll wire him the funds the next day. This time they'll give him $12,000/1.40/132, and after paying off his current balance ($7,000), he'll net $5,000 and his payment only goes up $19 a day. Not a bad deal, right? But here's the downside - because it's a renewal, they can only pay you commission on what the merchant nets, not on the full amount of the advance. That's OK, right? It makes sense, doesn't it? I mean, he's only netting $5K, so you should only get paid commission on $5K... right??

HELL F&@KING NO! IT MAKES ZERO SENSE!

When the merchant takes this deal, the funder is paying themselves off early. Which means that instead of having to wait six months to get paid back and redeploy their capital, they get to do it in half that time. It doesn't matter that it's coming from the same funder. It's a completely new deal. The minute they fund this, they increased their APY on the original deal from 61.68% to 123.36%. They also got to avoid most, if not all, of the underwriting costs involved, because they already have a relationship with the merchant. Most of the time they just need to do a bank login and make sure they guy's revenue is on track and he hasn't funded anywhere else. The costs are negligible. Plus, the risk has been significantly mitigated as compared to a brand new merchant. This guy has been paying for three months. The chances he'll default not are MUCH lower than a merchant who doesn't have any history with them. So all of these hard and soft costs can be reduced or completely eliminated from the equation.

Here's a ****ty analogy - when it's 2AM and you've got that "itch", do you get all dressed up, drive to the club, start buying expensive drinks for uptight gold-diggers and hope you get lucky? Or do you go through your contacts and make a couple booty calls? No cost, no effort, and you know what you're getting. Nuff said.

So back to my point. If I'm going to allow you to basically make double the return with essentially zero risk or cost, then you DAMN WELL BETTER PAY ME MY FULL COMMISSION. Any attempt to explain to me why you shouldn't is nothing more than you trying to sucker me. And I'm not a sucker.

I hope this has been informative to some of the NKOTB. You work hard for your merchant relationships. You have leverage. Don't get taken advantage of.

[funda21]

Mcaguru is correct, if you have volume and a solid performing book and a good relationship with some funders they won't clawback on you. That is accurate but he's won't and shouldn't air out his best partners but it happens all the time.

In regards to funder loyalty to performing brokers that's a big issue in this industry right now as I really don't feel the funders spend enough time analyzing the data and really appreciating the brokers who send them solid merchants and don't play games. Way to often they put policies in place across the board that hurt the good partners just as much as their mediocre ones and then in turn the brokers get annoyed and have to look out for themselves and move files or start doing things they wouldn't have otherwise I'd the loyalty was there. Yes a renewal should be paid out as a new deal, especially with a performing partner. It's very rare a good broker can't talk a merchant out of taking his business elsewhere so the funders are shooting themselves in the foot on that front if they play that game. The lack of loyalty and respect is one of the things killing this business right now and it's a shame

[Funder Mark]

While I cannot talk about clawbacks, I can say that Wall pays 100% commission on ALL renewals.

[LeadForensicsGuy]

Has anyone heard of a change in policy where they only pay on the net amount? Got super skimped on a commission and when I called up they threw the fact that we only funded 1 file this year that renewed twice for over 1.2M in total funding and that they had to waive the setup fee for the merchant.

This is the problem when funders try to take control of the negations directly with the merchant and try to cut out the broker.

Its a slap in the face when funders pull this stunt on renewals. Commission when from 42k to 12k on the renewal to 4k on the last one... why would we even bring these type of files if you're going to try to screw the brokers on the re ups?

....SMH... Thats Crazy!! I think I want to get back into the business but then I hear things like this. Makes me think a little longer. I would be furious and devastated. I'd call a lawyer or something. He might not be able to do anything but at least i felt good calling him. LOL!!!

[LeadForensicsGuy]

Incidentally, I'm dealing with this issue right now with another funder.

Paying an ISO even a penny less than full commission on the full funded amount on a renewal is not only a bad policy, it's completely idiotic.

Ignoring the fundamental mathematics for a moment, which I'll address below, why on earth would you create a disincentive for your brokers to renew performing merchants with you and keep them on your books!?

It's my merchant; if he needs more money, I can take him anywhere. I can get him the same or better deal than what you're offering, and I can probably make more money in the process, even if you're paying me my full commission. Remember, my sole objective as a broker is to shop for the best possible deals for my merchants while maximizing my revenue in the process.

But hey, I'm a relationship guy. And I also like the path of least resistance. You did right by me the first time around, so sure, I'll let you renew him. Nothing like a sure thing, right?

But wait... did I get this right? You want to pay me a reduced commission? Either by flat out paying a lower percentage, and/or by paying me based on what the merchant nets?!? What the flippity-f@&k is that all about?

What it ultimately boils down to is pure, unadulterated, disgusting, pig-stinky greed on the part of the funder, that's what it is. It's the funder simply getting over on the broker to increase their return. There is absolutely NO justifiable excuse for paying less on a renewal. And in fact, when you look at the math, a funder should actually pay MORE on a renewal.

Assume the funder gave your merchant an initial advance of $10,000/1.40/132 and paid you 10% commission. And let's give them the benefit of the doubt and assume they charged a "modest" 3% in fees. So when you add commission and deduct fees, they laid out $10,700 to yield $14,000, which works out to an ROI of 30.84%, and an annual percentage yield (APY) of 61.68% (because it's a six month term).

They also did a lot of initial underwriting up front. This is the first time they funded this merchant. They didn't know him from a hole in the wall. The did all the credit checks, background checks, lien/judgment searches, site inspections, the whole nine... they invested a lot of time and energy into deciding whether or not they want to take on the risk of funding this merchant. This needs to be factored into the equation, as it ultimately affects the ROI.

Now, three months into the deal you get an email from the funder telling you the "great news" - your merchant is 50% paid down and eligible for a renewal. Just have him update Decision Logic, sign an addendum, and they'll wire him the funds the next day. This time they'll give him $12,000/1.40/132, and after paying off his current balance ($7,000), he'll net $5,000 and his payment only goes up $19 a day. Not a bad deal, right? But here's the downside - because it's a renewal, they can only pay you commission on what the merchant nets, not on the full amount of the advance. That's OK, right? It makes sense, doesn't it? I mean, he's only netting $5K, so you should only get paid commission on $5K... right??

HELL F&@KING NO! IT MAKES ZERO SENSE!

When the merchant takes this deal, the funder is paying themselves off early. Which means that instead of having to wait six months to get paid back and redeploy their capital, they get to do it in half that time. It doesn't matter that it's coming from the same funder. It's a completely new deal. The minute they fund this, they increased their APY on the original deal from 61.68% to 123.36%. They also got to avoid most, if not all, of the underwriting costs involved, because they already have a relationship with the merchant. Most of the time they just need to do a bank login and make sure they guy's revenue is on track and he hasn't funded anywhere else. The costs are negligible. Plus, the risk has been significantly mitigated as compared to a brand new merchant. This guy has been paying for three months. The chances he'll default not are MUCH lower than a merchant who doesn't have any history with them. So all of these hard and soft costs can be reduced or completely eliminated from the equation.

Here's a ****ty analogy - when it's 2AM and you've got that "itch", do you get all dressed up, drive to the club, start buying expensive drinks for uptight gold-diggers and hope you get lucky? Or do you go through your contacts and make a couple booty calls? No cost, no effort, and you know what you're getting. Nuff said.

So back to my point. If I'm going to allow you to basically make double the return with essentially zero risk or cost, then you DAMN WELL BETTER PAY ME MY FULL COMMISSION. Any attempt to explain to me why you shouldn't is nothing more than you trying to sucker me. And I'm not a sucker.

I hope this has been informative to some of the NKOTB. You work hard for your merchant relationships. You have leverage. Don't get taken advantage of.

Well Said ... Well Said... tumblr_ne2xgj19sh1rnhnqfo1_500.gif

[CreditGuy]

Incidentally...

Yeah, no. As a funder, you're ignoring several facts to make your case. As someone that took basic math and accounting, your math and accounting are bad. To the former, I will point out that when a funder renews and they forgive the rest of the interest, they are also taking a haircut on the $14k they expected to receive. As for the latter bit about math and accounting, on $10k they are out $11k up front. The 3% fee doesn't magically appear. Think about it from a ledger perspective. The total transaction is $11k, so you need three offsetting transactions to balance the change to the cash position: $9700 becomes principal receivable, $300 fee is booked to earned income, and $1k in commissions paid.

Now, back to our original program. Let's assume the borrower has repaid about $2500 in interest at the time of renewal. That means the lender is forgoing $1500 in additional interest income by renewing. Now they laid out $11,000 to make $1,500. The borrower is on the hook for the principal they are rolling into the refinance regardless, so why double count it? Again, from an accounting perspective, the lender only increases outstandings on the net principal they lend. Why double pay a commission on principal you already paid for?

There are two sides to every transaction. This is a philosophical point to be hashed out in negotiations. If people don't want to do business with lenders that only pay out on the net, then don't sign contracts with them or have them alter the agreement, but don't sign a contract with certain terms and then ***** about them after the fact. You had your chance before you went into business with them.

[MCABroker]

Incidentally, I'm dealing with this issue right now with another funder.

Paying an ISO even a penny less than full commission on the full funded amount on a renewal is not only a bad policy, it's completely idiotic.

Ignoring the fundamental mathematics for a moment, which I'll address below, why on earth would you create a disincentive for your brokers to renew performing merchants with you and keep them on your books!?

It's my merchant; if he needs more money, I can take him anywhere. I can get him the same or better deal than what you're offering, and I can probably make more money in the process, even if you're paying me my full commission. Remember, my sole objective as a broker is to shop for the best possible deals for my merchants while maximizing my revenue in the process.

But hey, I'm a relationship guy. And I also like the path of least resistance. You did right by me the first time around, so sure, I'll let you renew him. Nothing like a sure thing, right?

But wait... did I get this right? You want to pay me a reduced commission? Either by flat out paying a lower percentage, and/or by paying me based on what the merchant nets?!? What the flippity-f@&k is that all about?

What it ultimately boils down to is pure, unadulterated, disgusting, pig-stinky greed on the part of the funder, that's what it is. It's the funder simply getting over on the broker to increase their return. There is absolutely NO justifiable excuse for paying less on a renewal. And in fact, when you look at the math, a funder should actually pay MORE on a renewal.

Assume the funder gave your merchant an initial advance of $10,000/1.40/132 and paid you 10% commission. And let's give them the benefit of the doubt and assume they charged a "modest" 3% in fees. So when you add commission and deduct fees, they laid out $10,700 to yield $14,000, which works out to an ROI of 30.84%, and an annual percentage yield (APY) of 61.68% (because it's a six month term).

They also did a lot of initial underwriting up front. This is the first time they funded this merchant. They didn't know him from a hole in the wall. The did all the credit checks, background checks, lien/judgment searches, site inspections, the whole nine... they invested a lot of time and energy into deciding whether or not they want to take on the risk of funding this merchant. This needs to be factored into the equation, as it ultimately affects the ROI.

Now, three months into the deal you get an email from the funder telling you the "great news" - your merchant is 50% paid down and eligible for a renewal. Just have him update Decision Logic, sign an addendum, and they'll wire him the funds the next day. This time they'll give him $12,000/1.40/132, and after paying off his current balance ($7,000), he'll net $5,000 and his payment only goes up $19 a day. Not a bad deal, right? But here's the downside - because it's a renewal, they can only pay you commission on what the merchant nets, not on the full amount of the advance. That's OK, right? It makes sense, doesn't it? I mean, he's only netting $5K, so you should only get paid commission on $5K... right??

HELL F&@KING NO! IT MAKES ZERO SENSE!

When the merchant takes this deal, the funder is paying themselves off early. Which means that instead of having to wait six months to get paid back and redeploy their capital, they get to do it in half that time. It doesn't matter that it's coming from the same funder. It's a completely new deal. The minute they fund this, they increased their APY on the original deal from 61.68% to 123.36%. They also got to avoid most, if not all, of the underwriting costs involved, because they already have a relationship with the merchant. Most of the time they just need to do a bank login and make sure they guy's revenue is on track and he hasn't funded anywhere else. The costs are negligible. Plus, the risk has been significantly mitigated as compared to a brand new merchant. This guy has been paying for three months. The chances he'll default not are MUCH lower than a merchant who doesn't have any history with them. So all of these hard and soft costs can be reduced or completely eliminated from the equation.

Here's a ****ty analogy - when it's 2AM and you've got that "itch", do you get all dressed up, drive to the club, start buying expensive drinks for uptight gold-diggers and hope you get lucky? Or do you go through your contacts and make a couple booty calls? No cost, no effort, and you know what you're getting. Nuff said.

So back to my point. If I'm going to allow you to basically make double the return with essentially zero risk or cost, then you DAMN WELL BETTER PAY ME MY FULL COMMISSION. Any attempt to explain to me why you shouldn't is nothing more than you trying to sucker me. And I'm not a sucker.

I hope this has been informative to some of the NKOTB. You work hard for your merchant relationships. You have leverage. Don't get taken advantage of.

PREACH!!!

Not only did Rapid pay themselves off early with this renewal but they also charged my client a 1.31 over 15 months and paid us a 1.5%

This merchant could of easily gotten offers north of 400K with ANY other A paper funder, we just happened to have him on the books with Rapid and thought it would be a smooth process. It really hurts to see them try everything in their power to pay the brokers the minimum. Let's be honest, Rapid's rate are far from great or competitive. They offer "premium" and "select" pricing that only pays 1.5% and 3%. Rapid also claims that while they "negotiate" with the merchant themselves on renewals but give us the power to call the shots on pricing. THIS IS NOT TRUE AT ALL! When it came time for the first renewal they called me freaking out stating that the merchant was going to walk if we didn't offer them premium pricing. Basically they said it is what it is and proceeded to fund the deal and sent us a measly 3% commission. I also wanted to add that when we first sold this deal rapid had to get the CEO to sign off on the commission, we honestly got the vibe that they weren't going to let us make the full 12 points that we upsold. Luckily they loved the deal and they really wanted to fund it.

LEARN FROM OUR MISTAKE AND BROKERS BEWARE!!!!!

[bizfundingfinder]

I will point out that when a funder renews and they forgive the rest of the interest, they are also taking a haircut on the $14k they expected to receive. As for the latter bit about math and accounting, on $10k they are out $11k up front. The 3% fee doesn't magically appear. Think about it from a ledger perspective. The total transaction is $11k, so you need three offsetting transactions to balance the change to the cash position: $9700 becomes principal receivable, $300 fee is booked to earned income, and $1k in commissions paid.

Now, back to our original program. Let's assume the borrower has repaid about $2500 in interest at the time of renewal. That means the lender is forgoing $1500 in additional interest income by renewing. Now they laid out $11,000 to make $1,500. The borrower is on the hook for the principal they are rolling into the refinance regardless, so why double count it? Again, from an accounting perspective, the lender only increases outstandings on the net principal they lend. Why double pay a commission on principal you already paid for?

There are two sides to every transaction. This is a philosophical point to be hashed out in negotiations. If people don't want to do business with lenders that only pay out on the net, then don't sign contracts with them or have them alter the agreement, but don't sign a contract with certain terms and then ***** about them after the fact. You had your chance before you went into business with them.

Dude, what are you talking about??

First of all, not to split hairs, but there's NO interest. MCAs aren't loans. If you haven't completely eliminated the word "interest" from your vocabulary by now, you are only hurting the entire industry by continuing to peddle cash advances while recklessly incorporating irrelevant and inaccurate terms into your vernacular.

Second of all, how do you figure that the funder takes a haircut on the original balance? They pay themselves off with the proceeds from the new advance, which is the cornerstone of this entire issue, e.g., that the merchant receives the net proceeds, or difference, after the funder pays themselves off, and that net amount is what they are trying to base the commission on.

And lastly, no offense, but your math is completely wrong. Please try to follow along. Funder gives $10K for $14K. At 50%, merchant has paid back $7K. Balance is $7K. Funder renews and gives another $12K for $16,800. Funder takes $7K from the new $12K and essentially moves it from one pocket to the other, paying off the original $7K balance. So now they got ALL their money that was owed on the original transaction. PLUS, they got is much faster - twice as fast, in fact, than if they simply collected it over the full term. The merchant is now on the hook for the entire payback on the new advance, $16,800. Where and how does the funder take a haircut or forego any amounts due to them?

The point that you are correct about is that a contract is a contract, and if a broker signs an ISO agreement they are indeed binding themselves to the terms thereof. But that doesn't mean they need to be happy about it, and it certainly doesn't mean they can't complain about it. The only way to prevent one side from getting out of control is to bring thee issues to light, protest, and use leverage to affect change.

As a policy, and on general principle, we are no longer renewing merchants with any funders that don't pay FULL commission on the FULL funding amount. Period. And we will likely avoid submitting new deals to them in the first place as well. Believe me, if the majority of sizable ISOs adopt the same stance, I guarantee the policies will change overnight.

[J.Celifarco]

The part about this conversation that I don't understand is why is this an issue.. If you don't like a banks policy DONT WORK WITH THEM. All of this info is given to you upfront when you sign an ISO agreement, this allows you to choose to work with banks that you agree with their policies. Why complain if you agreed to work with them or on the other hand why complain if you don't work with them.. Right or wrong each bank is allowed to choose how they want to structure their commission schedule. They are the ones taking the risk lending their money so they can pay anyway they want. It is then on the ISO's to do their due diligence and find the companies they want to work with. I don't get the point in complaining after the fact, pick the companies who's policy you agree with and work with them and don't work with the ones you don't. It seems simple to me

[CreditGuy]

First of all, not to split hairs, but there's NO interest. MCAs aren't loans. If you haven't completely eliminated the word "interest" from your vocabulary by now, you are only hurting the entire industry by continuing to peddle cash advances while recklessly incorporating irrelevant and inaccurate terms into your vernacular.

I don't originate MCAs, I originate loans. Nothing I said hurts the industry, and nothing I said was irrelevant or inaccurate.

We are obviously talking about two different things here, one of which is understood by one of us. The crux of this is trying to convince the audience that your greed is okay, but a funder's isn't. Like I said, that is a philosophical difference.

[bizfundingfinder]

I don't originate MCAs, I originate loans. Nothing I said hurts the industry, and nothing I said was irrelevant or inaccurate.

We are obviously talking about two different things here

Fair enough. But the thread was specifically about MCA renewals. You even quoted my post. So I presumed your arguments pertained to what we were previously discussing. I apologize for the harsh response.

[ARFTC]

Incidentally, I'm dealing with this issue right now with another funder.

Paying an ISO even a penny less than full commission on the full funded amount on a renewal is not only a bad policy, it's completely idiotic.

Ignoring the fundamental mathematics for a moment, which I'll address below, why on earth would you create a disincentive for your brokers to renew performing merchants with you and keep them on your books!?

It's my merchant; if he needs more money, I can take him anywhere. I can get him the same or better deal than what you're offering, and I can probably make more money in the process, even if you're paying me my full commission. Remember, my sole objective as a broker is to shop for the best possible deals for my merchants while maximizing my revenue in the process.

But hey, I'm a relationship guy. And I also like the path of least resistance. You did right by me the first time around, so sure, I'll let you renew him. Nothing like a sure thing, right?

But wait... did I get this right? You want to pay me a reduced commission? Either by flat out paying a lower percentage, and/or by paying me based on what the merchant nets?!? What the flippity-f@&k is that all about?

What it ultimately boils down to is pure, unadulterated, disgusting, pig-stinky greed on the part of the funder, that's what it is. It's the funder simply getting over on the broker to increase their return. There is absolutely NO justifiable excuse for paying less on a renewal. And in fact, when you look at the math, a funder should actually pay MORE on a renewal.

Assume the funder gave your merchant an initial advance of $10,000/1.40/132 and paid you 10% commission. And let's give them the benefit of the doubt and assume they charged a "modest" 3% in fees. So when you add commission and deduct fees, they laid out $10,700 to yield $14,000, which works out to an ROI of 30.84%, and an annual percentage yield (APY) of 61.68% (because it's a six month term).

They also did a lot of initial underwriting up front. This is the first time they funded this merchant. They didn't know him from a hole in the wall. The did all the credit checks, background checks, lien/judgment searches, site inspections, the whole nine... they invested a lot of time and energy into deciding whether or not they want to take on the risk of funding this merchant. This needs to be factored into the equation, as it ultimately affects the ROI.

Now, three months into the deal you get an email from the funder telling you the "great news" - your merchant is 50% paid down and eligible for a renewal. Just have him update Decision Logic, sign an addendum, and they'll wire him the funds the next day. This time they'll give him $12,000/1.40/132, and after paying off his current balance ($7,000), he'll net $5,000 and his payment only goes up $19 a day. Not a bad deal, right? But here's the downside - because it's a renewal, they can only pay you commission on what the merchant nets, not on the full amount of the advance. That's OK, right? It makes sense, doesn't it? I mean, he's only netting $5K, so you should only get paid commission on $5K... right??

HELL F&@KING NO! IT MAKES ZERO SENSE!

When the merchant takes this deal, the funder is paying themselves off early. Which means that instead of having to wait six months to get paid back and redeploy their capital, they get to do it in half that time. It doesn't matter that it's coming from the same funder. It's a completely new deal. The minute they fund this, they increased their APY on the original deal from 61.68% to 123.36%. They also got to avoid most, if not all, of the underwriting costs involved, because they already have a relationship with the merchant. Most of the time they just need to do a bank login and make sure they guy's revenue is on track and he hasn't funded anywhere else. The costs are negligible. Plus, the risk has been significantly mitigated as compared to a brand new merchant. This guy has been paying for three months. The chances he'll default not are MUCH lower than a merchant who doesn't have any history with them. So all of these hard and soft costs can be reduced or completely eliminated from the equation.

Here's a ****ty analogy - when it's 2AM and you've got that "itch", do you get all dressed up, drive to the club, start buying expensive drinks for uptight gold-diggers and hope you get lucky? Or do you go through your contacts and make a couple booty calls? No cost, no effort, and you know what you're getting. Nuff said.

So back to my point. If I'm going to allow you to basically make double the return with essentially zero risk or cost, then you DAMN WELL BETTER PAY ME MY FULL COMMISSION. Any attempt to explain to me why you shouldn't is nothing more than you trying to sucker me. And I'm not a sucker.

I hope this has been informative to some of the NKOTB. You work hard for your merchant relationships. You have leverage. Don't get taken advantage of.

This is exactly right. This is no reason why you should surrender any part of your commission while the lender enjoys 100% of their share. Well said and I love your analogy.

[ADiamond]

Incidentally, I'm dealing with this issue right now with another funder.

Paying an ISO even a penny less than full commission on the full funded amount on a renewal is not only a bad policy, it's completely idiotic.

Ignoring the fundamental mathematics for a moment, which I'll address below, why on earth would you create a disincentive for your brokers to renew performing merchants with you and keep them on your books!?

It's my merchant; if he needs more money, I can take him anywhere. I can get him the same or better deal than what you're offering, and I can probably make more money in the process, even if you're paying me my full commission. Remember, my sole objective as a broker is to shop for the best possible deals for my merchants while maximizing my revenue in the process.

But hey, I'm a relationship guy. And I also like the path of least resistance. You did right by me the first time around, so sure, I'll let you renew him. Nothing like a sure thing, right?

But wait... did I get this right? You want to pay me a reduced commission? Either by flat out paying a lower percentage, and/or by paying me based on what the merchant nets?!? What the flippity-f@&k is that all about?

What it ultimately boils down to is pure, unadulterated, disgusting, pig-stinky greed on the part of the funder, that's what it is. It's the funder simply getting over on the broker to increase their return. There is absolutely NO justifiable excuse for paying less on a renewal. And in fact, when you look at the math, a funder should actually pay MORE on a renewal.

Assume the funder gave your merchant an initial advance of $10,000/1.40/132 and paid you 10% commission. And let's give them the benefit of the doubt and assume they charged a "modest" 3% in fees. So when you add commission and deduct fees, they laid out $10,700 to yield $14,000, which works out to an ROI of 30.84%, and an annual percentage yield (APY) of 61.68% (because it's a six month term).

They also did a lot of initial underwriting up front. This is the first time they funded this merchant. They didn't know him from a hole in the wall. The did all the credit checks, background checks, lien/judgment searches, site inspections, the whole nine... they invested a lot of time and energy into deciding whether or not they want to take on the risk of funding this merchant. This needs to be factored into the equation, as it ultimately affects the ROI.

Now, three months into the deal you get an email from the funder telling you the "great news" - your merchant is 50% paid down and eligible for a renewal. Just have him update Decision Logic, sign an addendum, and they'll wire him the funds the next day. This time they'll give him $12,000/1.40/132, and after paying off his current balance ($7,000), he'll net $5,000 and his payment only goes up $19 a day. Not a bad deal, right? But here's the downside - because it's a renewal, they can only pay you commission on what the merchant nets, not on the full amount of the advance. That's OK, right? It makes sense, doesn't it? I mean, he's only netting $5K, so you should only get paid commission on $5K... right??

HELL F&@KING NO! IT MAKES ZERO SENSE!

When the merchant takes this deal, the funder is paying themselves off early. Which means that instead of having to wait six months to get paid back and redeploy their capital, they get to do it in half that time. It doesn't matter that it's coming from the same funder. It's a completely new deal. The minute they fund this, they increased their APY on the original deal from 61.68% to 123.36%. They also got to avoid most, if not all, of the underwriting costs involved, because they already have a relationship with the merchant. Most of the time they just need to do a bank login and make sure they guy's revenue is on track and he hasn't funded anywhere else. The costs are negligible. Plus, the risk has been significantly mitigated as compared to a brand new merchant. This guy has been paying for three months. The chances he'll default not are MUCH lower than a merchant who doesn't have any history with them. So all of these hard and soft costs can be reduced or completely eliminated from the equation.

Here's a ****ty analogy - when it's 2AM and you've got that "itch", do you get all dressed up, drive to the club, start buying expensive drinks for uptight gold-diggers and hope you get lucky? Or do you go through your contacts and make a couple booty calls? No cost, no effort, and you know what you're getting. Nuff said.

So back to my point. If I'm going to allow you to basically make double the return with essentially zero risk or cost, then you DAMN WELL BETTER PAY ME MY FULL COMMISSION. Any attempt to explain to me why you shouldn't is nothing more than you trying to sucker me. And I'm not a sucker.

I hope this has been informative to some of the NKOTB. You work hard for your merchant relationships. You have leverage. Don't get taken advantage of.

i have a few issues with this statement.

first of all, are you sure your ROI calculations are on point? you're not going to factor in default rate like real lenders have to?

secondly, "APY" if it even existed goes from approx 61% to approx 123%? - you're not going to consider the fact that syndication exists and that most of the time it is not the same lender coming back in the deal for the same percentage?

you can take the merchant anywhere and get him the same deal, possibly even more money? really? we all know that MOST B & C lenders aren't paying each other off. now you're subject to a consolidation lender who's terms may vary and are going to pay you less in commission than the original lender AND the term is going to be a lot shorter due to them assuming the risk, or trying to find an "A" lender who's terms when paying off may not even apply to qualify the client for a renewal to begin with.

i'm not going to nit pick the whole statement but you sir, like MOST ISO's are a crybaby idiot with a heightened sense of entitlement and a big ego and a loud mouth to overcompensate for short tempered lack of common sense that your breed has in spades.

listen, i agree with you, you should get paid the full commission unless otherwise agreed in your iso agreement... but the "big swinging dick syndrome" that you have just shown with this rant is right on par with 70% of the ISO's in this industry. give me give me give me... fund my deal, renew it early.... lender drop your rate and extend your term to help me sell the deal then when it stops payment i'm nowhere to be found (because you have that great relationship with the client right? because we all know merchants are so loyal..... riiiiiight????!!!)

the second a lender doesn't give you one more point commish, or drop the factor rate 1% and tack on 21 days.... you're so quick to say "well i'll just go fund it with XYZ they gave me 10k more at 150 days and they're paying me more commission"....

where's the loyalty then? mr. i can bring the deal anywhere. that exact reason is why lenders don't want to risk leaving it up to a "broker" bringing back a deal for renewal. OR did it ever occur to you that maybe the merchant called the lender directly and said you're a piece of **** that hits him for a 10% psf after already being paid 12-14% every time you stack him and renew him, and he doesn't want to deal with you? BUT then the lender has the courtesy to say hey you know what we're renewing your deal directly and we're still going to pay you on it

it's all about you and your commission. **** the merchant and **** the book really you really dont care when it comes down to it. ****ing savages.