How broker commission works
MCA brokers (ISOs) earn money on every deal they submit that funds. The compensation structure is two-layered: a base commission paid by the funder at funding, plus any upsell markup the broker captures by quoting a higher factor than the funder approved.
Base commission is a straightforward percentage of advance face value. On a $50,000 advance with an 8% commission, the broker is paid $4,000 at funding. The funder finances that commission into the deal — meaning the merchant ultimately repays it through the factor rate.
Upsell is where the system gets murkier. The funder approves a specific factor rate, say 1.28. The broker is free to quote the merchant a higher factor, say 1.34. If the merchant accepts, the broker earns the 6-point spread on top of base commission — roughly an additional 4-5% of advance face. The funder doesn't care (they get their target yield), the merchant doesn't know (because the approved rate isn't disclosed), and the broker earns double.
Base commission by paper grade — 2026 ranges
Funders pay different base commissions based on paper grade and ISO tier. Typical 2026 ranges:
- A paper, top-tier ISO: 4-7% of advance face
- A paper, standard ISO: 6-9%
- B paper: 7-11%
- C paper: 9-13%
- D paper: 11-15%
- Renewals: 2-5% (lower because the funder already has the relationship)
Top-tier ISOs earn lower percentage commissions because they deliver high volume and clean files. Funders prioritize them for fast underwriting and reward the relationship with better economics. Smaller ISOs or one-off submissions pay full retail commission.
Industry skew matters:
- Restaurant deals: standard commission
- Trucking deals: often 1-2 points lower commission (funders are pickier on trucking and pay less for volume)
- Healthcare/dental: often 1-2 points higher commission (funders compete harder for these clean deals)
- Construction: standard, varies by funder appetite
Upsell markup — the hidden layer
Upsell is the variable that turns a 9% commission into an effective 15-20% compensation on the broker side. Worked example:
- Funder approves $50,000 at 1.28 factor (12 months)
- Funder pays broker 9% base commission = $4,500
- Broker quotes merchant 1.34 factor, contract written at 1.34
- Merchant pays $67,000 total instead of $64,000 — extra $3,000
- Broker earns $4,500 (base) + $3,000 (upsell) = $7,500 total = 15% of advance face
That extra 6 points of factor rate adds roughly $250 to the merchant's monthly cash flow burden. Over the life of the deal, the merchant is paying $3,000 they wouldn't have paid if they'd gone direct or through a non-upselling channel.
Multiply this across thousands of deals industry-wide and the merchant-side cost of broker upsell is substantial — easily $500M-$1B+ per year of MCA volume that ends up in broker pockets rather than merchant pockets.
White-label markup
A specific upsell variant: white-label arrangements where the broker brands the product as their own and the funder is invisible. The broker quotes the merchant a factor rate and term as if they're the lender; the funder approves at a lower rate; the broker captures the spread as commission plus markup.
White-label compensation can run 15-22% of advance face in extreme cases. Common in industry verticals where the broker has a strong relationship (a CPA firm that markets MCA to its tax clients, a payroll provider that bundles cash advance, etc.). The merchant has no visibility into the funder economics at all.
White-label isn't inherently bad — sometimes it provides legitimate value (curation, support, ongoing relationship) — but the lack of disclosure makes it impossible for merchants to evaluate whether the markup is reasonable.
State disclosure rules — where things are changing
A handful of states now require commercial financing disclosures that include broker compensation. As of 2026:
- California (SB 1235): requires APR, total cost of capital, and broker compensation disclosure on commercial financing transactions in CA
- New York (NYDFS 23 NYCRR 600): similar disclosure regime, includes broker fees as a line item
- Virginia, Utah, Florida, Georgia, Connecticut: various disclosure regimes, some include broker compensation
- New Jersey (SB 819): 2026 disclosure law adds NJ to the list
- Ohio (SB 232): 2026 disclosure law
In disclosure states, brokers are legally required to tell you what they're earning. In non-disclosure states, they have no obligation. If you're in California or New York, ask for the broker-compensation disclosure and read it. If you're elsewhere, you'll have to triangulate by getting multiple quotes.
How to compare quotes that aren't apples-to-apples
A broker quote of "1.32 factor, $50K, 12 months, daily ACH" doesn't tell you what the broker is earning. To get to a real comparison:
- Get the same deal quoted by 2-3 channels. An ISO broker, a matching platform, and (if you qualify) a direct funder. Compare the final factor rates.
- Ask each one which funder is approving. If two channels are quoting the same funder, the cheaper quote is the one with less channel markup.
- Compute the broker compensation implied by the spread. A 6-point factor spread on a $50K deal is roughly $3,000 of broker upsell.
- Be skeptical of "I can get you a better deal" follow-ups. A broker who matches a lower quote after you push back was earning the difference as upsell.
When brokers earn their commission — and when they don't
Not all broker compensation is wasted. The good brokers earn theirs by:
- Knowing which funders write which industries and avoiding wasted submissions
- Packaging applications professionally so they don't bounce on technicalities
- Pushing back on funder lowball offers and negotiating higher amounts
- Coordinating renewals and managing the relationship across multiple deals
- Being available when the merchant has questions during repayment
The bad brokers earn theirs by:
- Shopping the same file to 8 funders and accepting whichever one quotes first
- Marking up factor rates aggressively on merchants who don't know better
- Pushing larger advance amounts than the merchant needs (more commission)
- Ghosting after funding because the next deal pays more
- Encouraging stacking because each new advance pays a new commission
The variance in broker quality is enormous. The best brokers genuinely add value worth their commission. The worst brokers are net-negative — they cost merchants more than they save and often push deals that shouldn't have been written at all.
The bottom line
Broker commission is a real cost. On a typical 2026 deal it's 5-12% of advance face for base compensation, plus 0-10% of upsell markup depending on how the broker operates and whether you're in a disclosure state. The merchant pays for all of it through the factor rate.
Working with a broker isn't automatically a bad decision — the good ones add enough value to justify the cost. But going in without understanding what they earn is what gets merchants overcharged. Always compare across channels, always ask about funder identity, and be skeptical of any quote that arrives with urgency and no comparison data.
Frequently asked questions
- What's a typical ISO broker commission in 2026?
- Base commission is 5-12% of the advance face value, paid at funding. Top-tier ISOs with strong volume and clean files earn the lower end; smaller ISOs or stretched submissions sit at the higher end. With upsell and white-label markup, total broker compensation can reach 18-22% of advance face in worst-case structures.
- What's broker upsell?
- When a broker quotes a higher factor rate than the funder approved, pocketing the difference. If the funder approved you at 1.28 and the broker writes the contract at 1.34, the 6-point spread (about 4-5% of advance face) goes to the broker on top of base commission.
- Is broker upsell legal?
- Yes, in most states. It's the structural problem with the ISO model. A handful of states (NY, CA, VA, UT, OH) now require disclosure of total broker compensation; the rest do not. Outside disclosure states, the broker has no obligation to tell you what they're earning.
- How can I tell if my broker is upselling me?
- Ask the funder directly what factor rate they approved. Some funders will tell you; many will not because their broker contracts forbid disclosure. The cleaner approach: get quotes from 2-3 separate sources (broker, direct, matching platform) and compare. A 5+ point factor spread across same-funder quotes is usually upsell.
- Are matching platforms cheaper than ISO brokers?
- Usually yes. Matching platforms earn typically 1-3% of advance face vs 5-12% ISO commission — and they generally do not upsell because their economics work on volume and match-quality, not per-deal markup. The savings often pass through to merchants in the form of better-quality matching to lower-rate funders.