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Buy rate
Also called wholesale rate, cost rate, funder rate.
The price the funder is willing to fund at, before the broker's markup, with the gap between it and the rate the merchant signs forming the broker's compensation.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A funder approves a file at, say, a 1.30 factor. That is the buy rate. The broker is permitted under its agreement to paper the deal at a higher factor, and the difference is retained as commission, either paid out by the funder or reflected in a larger purchased amount.
The same idea runs through equipment finance, where a lessor quotes a rate to a broker or vendor who marks it up, and through some lending channels. The vocabulary is borrowed from wholesale distribution, and the analogy holds: the merchant is buying at retail from someone who bought at wholesale.
Markup caps exist in most funder-broker agreements, expressed as maximum points or a maximum factor uplift. They protect the funder's reputation and its portfolio, not the merchant's wallet.
The buy rate is not a secret because it is shameful; it is a secret because disclosing it would make the transaction negotiable. Merchants who ask directly what the funder approved at, in writing, sometimes get an answer, and asking changes the conversation even when they do not.
Where this one catches people
Comparing two brokers' offers from the same funder is not comparing funders. Merchants routinely believe they have shopped the market when what varied was the markup, not the underlying credit decision. Ask which funder each offer comes from; two offers from the same funder at different rates tell you exactly what is being added.
Worked through
Funder approves 80,000 at a 1.28 buy rate, a purchased amount of 102,400. The broker sells it at 1.38, a purchased amount of 110,400. The merchant pays 8,000 more for the identical funder decision, and that 8,000 is the broker's backend.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Buy rate — common questions
What does buy rate mean?
The price the funder is willing to fund at, before the broker's markup, with the gap between it and the rate the merchant signs forming the broker's compensation.
Where does buy rate catch people out?
Comparing two brokers' offers from the same funder is not comparing funders. Merchants routinely believe they have shopped the market when what varied was the markup, not the underlying credit decision. Ask which funder each offer comes from; two offers from the same funder at different rates tell you exactly what is being added.
Is buy rate the same as an interest rate?
Buy rate is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does buy rate apply to?
Merchant Cash Advance, Working Capital, Business Line of Credit, Equipment Financing.
Is there a worked example of buy rate?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside buy rate?
Annual percentage rate, Backend fee, Broker, Broker agreement, Commission.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.