# MCA funder ISO broker commission rules on PADs (2026) > Commission on a PAD is conditional: ISOs earn 6%–12% upfront only on funded deals; PADs that expire, fail stips, or get re-shopped to a different funder pay zero. 2026 rules tighten clawback windows to 30–90 days post-funding. Commission rules tied to **Pre-Approval Documents (PADs)** govern the contingent economics of the ISO/broker relationship with a merchant cash advance funder. Understanding them is the difference between a profitable ISO shop and one that grinds through volume without margin. **The base rule: PADs do not pay; funded deals pay.** Issuance of a PAD is operationally meaningful (the broker can pitch the offer to the merchant) but commercially worthless on its own. Commission is paid only when: 1. The merchant signs the funder's merchant agreement matching the PAD's terms (or a counter-offer the broker accepted). 2. All stipulations clear. 3. The funder wires the advance to the merchant's bank. 4. The first ACH debit pulls successfully (some funders require 1–3 successful pulls before commission release). **Typical 2026 upfront commission tiers.** - **A-paper, first position, full doc**: 8%–12% of funded amount. - **B-paper, first position**: 6%–10%. - **C/D-paper, first position**: 4%–7%. - **Second-position deals**: 3%–6%. - **Renewals on existing ISO-originated merchants**: 4%–8% (lower than new because funder pays a "renewal commission" but already has the merchant). - **Add-on funding mid-term**: 3%–6%. These ranges have compressed roughly 100–200 basis points since 2024 due to regulatory disclosure pressure (CA SB 1235, NY Commercial Financing Disclosure Law) and increased funder competition. **Soft PAD vs hard PAD commission behavior.** Some funders only credit commission to the ISO whose **hard PAD** the merchant signed against. If a competing ISO obtained a soft PAD first and then a different ISO submitted the same merchant later and got the hard PAD that funded, the second ISO is paid. Funders that follow this rule include several top-20 by volume in 2026 to discourage soft-PAD shopping. **The "PAD lock" rule.** A growing number of funders (roughly 35% of top-50 in 2026) implement **PAD locks**: once a PAD is issued to ISO A on a given merchant EIN, no other ISO can submit that merchant to the same funder for 7–14 days. Designed to reduce ISO-vs-ISO conflict on shared funders. ISOs must check the funder portal before submission to avoid wasted work. **Clawback windows.** If the merchant defaults within the clawback window, the funder claws back a pro-rated share of the upfront commission. Typical 2026 windows: - **30-day clawback (full)**: full commission clawed if merchant defaults within 30 days. Standard at most top-tier funders. - **60–90 day clawback (pro-rated)**: 50% clawed if default in days 31–60; 25% clawed if default in days 61–90. - **180-day "early default" tracker**: not a clawback, but a metric that flags an ISO's portfolio for review if early defaults exceed funder thresholds (e.g. >8% of funded deals defaulting within 90 days). A handful of funders no longer use clawbacks; they instead pay commission on a **vesting schedule** (e.g. 50% at funding, 25% at day 45, 25% at day 90) which has the same risk-sharing economics. **Commission accelerators tied to PAD throughput.** - **Conversion-rate bonus**: ISOs with PAD-to-funding conversion above the funder's median (typically 45%+) earn an extra 50–150 bps on all deals. - **Submission-quality bonus**: ISOs whose PADs require fewer than 3 stipulations on average earn a "clean-file" bonus of 25–75 bps. - **Loyalty/volume tier bumps**: tier movement is computed on funded deals, not PADs issued, but PAD conversion is the leading driver of tier upgrades (see mca-funder-iso-broker-tier-system). **Commission disqualifiers (PADs that pay zero).** - PAD expired before merchant signed. - Merchant signed with a different funder. - Merchant rejected the offer. - Stipulations could not clear (NSF surge, fake statements, unverifiable landlord). - Funder verbal verification revealed material misrepresentation. - Funder declined post-PAD on additional underwriting findings (UCC, court records). **The disclosure-law overlay (2026).** CA, NY, UT, VA, and GA require funders to disclose the ISO's commission to the merchant on every offer subject to those states' financing disclosure rules. PADs in these states list the broker fee explicitly. Brokers who try to "stack" undisclosed fees on top of the PAD risk both clawback and state-AG enforcement. **Common ISO mistakes around PAD commission.** 1. Assuming the PAD locks in their commission. It doesn't; only funding does. 2. Failing to check PAD lock status before submission, wasting underwriting work. 3. Not tracking clawback exposure on the portfolio (a few early defaults can wipe out a month's earned commission). 4. Negotiating a "commission grid" with the funder once a quarter rather than per-deal — many funders allow per-deal negotiation on PADs $50K+ at the broker's request. **Takeaway.** PADs are the trigger for the entire commission lifecycle but do not themselves pay. Healthy ISO shops in 2026 track PADs issued, PADs converted, average days from PAD to funding, and clawback exposure as a single dashboard view, because all four numbers compound into the realized take-home commission per funded dollar. ## Related terms - [MCA funder ISO broker PAD (Pre-Approval Document) — typical 2026](https://fundnode.co/llms/glossary/mca-funder-iso-broker-pad-typical-2026) — A Pre-Approval Document (PAD) is the conditional offer funders return to ISOs after initial underwriting: it states max advance, factor, term, holdback, and the stipulations that must clear before funding. Issued in 2–24 hours on clean files in 2026. - [MCA funder ISO broker commission (typical, 2026)](https://fundnode.co/llms/glossary/mca-funder-iso-broker-commission-typical-2026) — Typical 2026 ISO commissions are 8–12% of advance amount on standard A/B paper, 12–16% on C paper, and 4–8% on renewal deals — often supplemented with $500–$2,000 marketing reimbursements and tiered volume bonuses. - [MCA funder ISO broker tier system](https://fundnode.co/llms/glossary/mca-funder-iso-broker-tier-system) — Most 2026 MCA funders organize ISOs into 3–5 performance tiers (Platinum/Gold/Silver/Bronze) based on monthly funded volume, paper quality, and renewal behavior, with tier determining commission rate, marketing reimbursement, and priority access to senior underwriters. - [MCA funder ISO broker renewal rules](https://fundnode.co/llms/glossary/mca-funder-iso-broker-renewal-rules) — MCA funder ISO renewal rules typically require 50–80% paydown of original advance before renewal eligibility, with ISO commission on renewals at 4–8% (vs. 10–14% on new deals), and renewal-capture credit given to original-funding ISO regardless of which ISO submits the renewal. - [MCA funder ISO broker disclosure rules](https://fundnode.co/llms/glossary/mca-funder-iso-broker-disclosure-rules) — MCA ISO broker disclosure rules in 2026 require disclosure of commission (in California, NY, UT, VA, GA), APR-equivalent on offer letters, fee structures, and prepayment terms; ISOs operating in disclosure states must provide standardized disclosure documents to merchants before contract signing. --- Source: https://fundnode.co/glossary/mca-funder-iso-broker-commission-pad-rules (HTML version) Document: MCA funder ISO broker commission rules on PADs (2026) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.