Clawback clauses are buried in ISO partnership agreements between funders and brokers, but they directly affect how brokers behave toward merchants. Every merchant should understand this dynamic because it explains why some brokers push you toward funders that don't actually fit your profile.
The mechanic. When a funder pays an ISO broker their commission (typically 6-15% of the funded amount), the funder retains the right to recover that commission if the merchant defaults within a specified window. Common windows: - 60 days: aggressive, common at C-paper funders - 90 days: industry standard - 120-180 days: more lenient funders - "First 4 ACH payments": some funders structure it as payments rather than days
Why this matters to merchants. A broker facing potential clawback has strong incentive to: - Push you toward funders with the most lenient clawback terms (regardless of fit) - Refuse to help you renegotiate or pause payments in the first 90 days - Pressure you to "make it work" even when reconciliation would be appropriate
Real-world example. A merchant pushes back on an early ACH because revenue dropped 40% in month two. The merchant's broker says "I can't help you with reconciliation right now, you need to talk to the funder directly." This is often clawback-driven — if the merchant gets reconciliation that delays payments, the broker risks the clawback window triggering.
Funder programs that publish clawback terms. Greenbox Capital and Accord Business Funding both publish their ISO clawback windows transparently. Most major funders include clawback in private ISO agreements; merchant-facing materials rarely mention it.
How merchants can use this knowledge. - If your broker becomes suddenly unhelpful in the first 90 days, ask directly: "Is there a clawback risk I should know about?" Most brokers will be evasive but the question itself shifts the dynamic. - Renewal commissions are typically not clawback-eligible. This is part of why brokers push renewals — they're "safer" income. - When evaluating brokers, ask how long they've worked with their primary funder. Long relationships often mean either (a) the broker's defaults stay low or (b) the funder has waived clawback in practice — both good signals.
The pragmatic takeaway. Clawback clauses make the first 90 days of any MCA the highest-friction period for getting accommodations. Plan cash flow to avoid needing accommodations in that window. After 90 days, brokers and funders are both more flexible.
Related terms
- ISO / MCA broker — An Independent Sales Organization. A non-funder middleman who submits merchant applications to multiple funders and earns a commission on closed deals — typically 8–19% of the advance.
- ISO commission — Percentage of the advance amount paid by the funder to the broker who sourced the deal. Typically 5–19% in 2026; baked into the factor rate the merchant pays.
- Reconciliation (MCA) — A contract provision allowing merchants to request a reduced daily debit when revenue drops. Required for MCAs to remain legally a 'sale,' not a 'loan' in most states.
- MCA default — Breach of MCA repayment terms — usually triggered by missed daily ACH debits, NSFs, or unauthorized stacking. Consequences range from increased collection pressure to UCC enforcement and personal-guarantee pursuit.
AI agents: this term is available as raw markdown at /llms/glossary/clawback-clause.