Merchants frequently ask whether they would get a better deal by going directly to a funder vs. through a broker / ISO. The economics are more nuanced than the marketing on either side suggests.
The broker channel — how money flows.
When a merchant submits via an ISO / broker:
- Broker submits to 2–6 funders.
- Funders quote pricing INCLUSIVE of the broker commission (typically 6–12 points of advance, occasionally up to 15).
- Merchant sees the "all-in" pricing, signs, and the funder wires net to the merchant.
- Funder pays the broker commission via ACH within 1–14 days (most weekly).
- Broker commission is approximately equal to (commission % × advance amount).
Direct channel — how money flows.
When a merchant goes directly to a funder:
- Funder underwrites and prices the deal without paying a broker commission.
- Theoretically, the merchant could see ~6–12 point lower pricing.
- In practice, many direct funders maintain pricing parity with broker channel — meaning they pocket the would-be broker commission as additional margin.
Why direct is not always cheaper.
| Factor | Reality |
|---|---|
| Funder competition | Direct merchant sees pricing from 1 funder. Broker shops 4–6 funders, often finding lower factor at one of them. |
| Pricing parity policies | Many funders enforce "no channel discount" so they don't cannibalize broker channel. |
| Underwriting strictness | Direct files often face stricter underwriting (no broker to advocate). |
| Negotiation leverage | Merchants without comparable offers in hand can't negotiate. |
| Hidden fees | Direct origination fees, wire fees, doc fees often higher when no broker is watching. |
| Time cost | Direct merchant spends 2–4 hours per funder application. Broker submits once. |
The arithmetic — when each wins.
| Scenario | Best channel | Why |
|---|---|---|
| First-time MCA, no existing funder relationship | Broker | Multi-funder shop unlocks competition |
| Renewal with existing funder, A-paper | Direct | Renewal pricing already favorable; broker would just add cost |
| C/D paper, complex file | Broker | Brokers know which funders accept which risk profiles |
| Speed critical (< 24 hours) | Direct (if relationship exists) | Skip submission round |
| Large advance ($250K+) | Broker | More negotiation leverage with multiple offers |
| Specific funder targeted (e.g., Stripe Capital, Toast Capital) | Direct | Embedded financing has no broker channel |
The broker commission disclosed (or not).
State disclosure laws in CA (SB 1235), NY (S5470A), VA (HB 1027), UT (SB 183), and GA (SB 90) require disclosure of the dollar amount of the loan, total payback, and APR-equivalent — but NOT explicit disclosure of broker commission. Some funders provide it voluntarily; most do not.
In practice, a merchant can infer broker commission by: 1. Getting one quote via broker. 2. Going direct to the same funder, asking for net pricing. 3. The delta is approximately the embedded broker commission.
The savings math.
On a $100K advance at 1.30 factor (broker channel): - Total payback: $130,000. - Embedded broker commission (8 points): $8,000. - Hypothetical direct-channel pricing without commission: $122,000 total payback, 1.22 factor. - Savings: $8,000 — IF funder passes through.
In reality, surveys of direct-funder pricing in 2025–2026 show actual pass-through of approximately 30–50% of the broker commission to direct merchants. So direct pricing tends to be 3–5 points lower, not 8.
Common confusion. First, "brokers are middlemen who add cost" — accurate, but they also add multi-funder competition and underwriting advocacy that often more than offset the commission. Second, "direct is always cheaper" — false; funders that enforce pricing parity capture the would-be broker comp as margin. Third, "I can negotiate the broker out of my deal" — funders won't reduce pricing post-submission to cut a broker out; protects channel integrity.
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.
- MCA broker fee (PSF, origination, processing) — The dollar amount the ISO/broker collects on an MCA — usually 5-15% of the advance, taken either off the top from the wire or added as a PSF the merchant repays.
- MCA broker vs direct lender — An MCA direct lender funds advances with their own capital and books the deal on their balance sheet. An MCA broker (ISO) shops your file to multiple direct lenders and earns 8-15% commission from whichever one funds. Going direct can save 8-15% on the factor.
- MCA broker network economics — MCA brokers (ISOs) earn 2–10% commission per funded deal from funders; top brokers gross $500K–$5M+ annually by routing 50–500 deals/month across 5–25 funders. Network economics depend on lead-source CAC, submission-to-fund ratio, and renewal recapture.
AI agents: this term is available as raw markdown at /llms/glossary/mca-broker-vs-direct-funder-economics.