Are MCA brokers required to disclose their commission?

Full answer

State disclosure laws in 2026. (1) California SB 1235 (effective 2022) — requires APR-equivalent disclosure on commercial financing and broker compensation disclosure. (2) New York commercial financing disclosure law (effective 2023) — requires similar disclosures including broker commission identification. (3) Connecticut (effective 2024), Utah (effective 2023), Virginia (effective 2023), Georgia (partial, effective 2022) — varying degrees of disclosure required including broker commission in some cases. (4) Most other states — no specific MCA broker commission disclosure requirement. Federally, no Truth-in-Lending equivalent applies to commercial financing.

Why broker commission matters to your math. Broker commission is paid by the funder out of the deal economics, which the funder recoups by marking up the factor rate quoted to you. Direct-to-funder pricing is typically 4-19% lower in effective cost than broker-quoted pricing. Example: a direct deal at factor 1.30 might be quoted to you through a broker at factor 1.37-1.50 depending on broker commission. On a $100K advance over 6 months, that's $7K-$20K in additional cost — often more than the merchant 'saves' by using a broker to shop deals.

Typical broker commission ranges in 2026. (1) A-paper deals (strong credit, large advances): brokers earn 3-6% of advance amount. (2) B-paper deals (moderate credit, medium advances): 6-12% typical. (3) C-paper deals (weak credit, smaller advances): 10-19% typical, sometimes higher. (4) Specialty deals (industry-specific, unusual structures): variable. (5) Renewals: brokers may earn smaller commission on renewals (2-5%) or no commission depending on funder policy.

How brokers earn their commission structure. (1) Origination commission — paid at funding, typically 4-19% of advance amount. This is the most visible cost. (2) Performance commission — some funders pay brokers an additional 1-3% if the deal performs to maturity (no early default). (3) Renewal commission — 2-5% on renewals where broker brought the original deal. (4) ISO override — some brokers have layered ISO arrangements where an upline ISO takes a slice (2-5%). Total broker compensation can stack to 6-25% on the most predatory deals.

Greenbox Capital — the rare transparent funder. Greenbox publishes its ISO commission caps: up to 19% on certain products. This is unusual in the MCA industry, where commission terms are typically opaque. Greenbox's transparency lets merchants identify the maximum broker markup they could be paying on a Greenbox-funded deal. Other funders (Credibly, Kapitus, OnDeck, Rapid Finance) typically don't publish ISO commission terms, requiring you to ask the broker directly or back-calculate from direct-vs-broker pricing comparisons.

How to ask the broker for commission disclosure. Direct ask: 'I want to understand the total cost of this deal. What is your commission on this advance, and what is the direct factor rate from the funder before your markup?' Legitimate brokers respond with a specific number or range and may explain the value-add justifying the commission. Predatory brokers deflect with: 'The funder pays me, not you,' 'My commission doesn't affect your rate,' 'That's confidential,' or 'It's already built into the factor I'm quoting.' These responses are red flags.

Detecting broker markup in your offer. (1) Compare the broker-quoted factor to the funder's published or publicly known rate range for your profile. If broker-quoted is 0.10-0.15 above the typical published range, that's likely broker markup. (2) Apply direct to the funder and compare offers. If the direct offer is materially better, the broker was marking up. (3) Use the broker markup calculator on Fundnode (/tools/broker-markup-calculator) to estimate the markup based on your specific deal terms. (4) Ask the funder directly: 'What is the wholesale factor on this deal before broker commission?'

When to use a broker vs apply direct. (1) Use direct when: you know which funder fits your profile, you have time to navigate the application process, the funder accepts direct applications (most do). Direct saves 4-19% in effective cost. (2) Use a broker when: you have a complex profile (lien, bankruptcy, unusual industry) and need someone who knows which 3-5 funders fit your specific situation, you don't have time to shop 10+ funders yourself, you're a first-time MCA merchant and need education on the process. Pay the broker commission for the matchmaking value if it's genuinely needed.

Negotiating broker commission. Yes, broker commissions are negotiable: (1) Tell the broker upfront you're comparing direct quotes. (2) Ask for the broker's commission cap to be reduced (e.g., 'Will you cap your commission at 6% on this deal?'). (3) For larger deals ($250K+), brokers often have more room to negotiate because absolute dollar earnings are still substantial at lower percentages. (4) Get any commission reduction in writing — verbal commitments don't bind.

Conflict of interest issues. Brokers are paid by funders, not merchants. This creates structural conflict: the broker has incentive to (1) Recommend funders that pay higher commission, even if not the best fit for you. (2) Recommend higher factor rates (their commission is often a % of the advance, so larger/longer deals = more commission). (3) Discourage you from shopping competing offers (loses them the commission). (4) Push renewals even when payoff would serve you better. Be aware of this; broker advice is not neutral.

ISO licensing requirements by state. Some states require MCA brokers/ISOs to be licensed: (1) California Department of Financial Protection and Innovation (DFPI) — commercial financing broker license required. (2) New York — Department of Financial Services may require commercial loan broker registration. (3) Florida — some commercial finance broker registration required depending on product structure. (4) Many other states — no specific MCA broker licensing. Verify your broker's licensing status before signing in regulated states.

Documenting broker commission for your records. (1) Request a written compensation disclosure from the broker before signing. (2) Save email correspondence showing what was quoted vs what appears in the final contract. (3) Note any side payments, fees, or 'service charges' the broker collects separately from the funder. (4) Keep records for at least 4 years in case of contract dispute or audit.

Bottom line: MCA broker commissions range 4-19% of the advance amount and materially affect your effective factor rate. California, New York, Connecticut, Utah, Virginia, and Georgia require disclosure to varying degrees; most states do not. Always ask the broker their commission in writing before signing — legitimate brokers disclose. For most merchants who know which funder fits their profile, applying direct saves 4-19% in cost compared to brokered deals. Use brokers when you genuinely need matchmaking value for complex situations; otherwise go direct.

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