Glossary · broker

Independent sales organization ISO

Also called independent sales office, funding broker, MCA broker, syndicating broker.

A sales firm that originates funding applications and places them with funders for a commission — the party most merchants actually deal with, and not the party whose money is at risk.

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

Almost every merchant cash advance and short-term working capital deal in the US reaches a funder through an ISO. The ISO advertises, buys leads, calls merchants, collects the application and bank statements, submits the file to funders, negotiates the terms it presents to you, and is paid on funding. It does not underwrite, does not approve, does not hold the contract and does not fund.

Who you are actually contracting with

Two separate relationships exist and they do not overlap.

  • You and the funder. The receivables purchase agreement, the guaranty, the ACH authorisation and the UCC filing are all between you and the funder. Payments go to the funder. Reconciliation requests go to the funder. The funder can enforce
  • The ISO and the funder. A separate ISO agreement governs commission, clawbacks and conduct. You are not a party to it and generally cannot enforce it

There is usually no contract at all between you and the ISO beyond the application, and the application is mostly authorisations: to pull credit on every owner, to obtain and share your bank data, to submit your file to multiple funding sources, and to be contacted.

How the ISO gets paid

Commission, out of your deal, in one or both of two forms.

  • Points: a percentage of the funded amount, deducted at closing. If the approval is for one number and the wire that lands is smaller, part of that gap is commission
  • The spread: the funder quotes the ISO a buy rate — the price at which it is willing to fund. The ISO presents you a higher sell rate and keeps the difference, which you pay across the life of the advance. Nothing in your paperwork itemises it, because to you it is simply the price

Both are paid by the merchant. "It costs you nothing, the funder pays us" describes the direction the cheque travels, not who funded it.

The consequences

The ISO's compensation rises with the size of the advance and with the spread it can add. It has no fiduciary duty to you, is not your agent, and in most states is not required to hold a lending licence — commercial broker licensing exists in some states and not others, and the rules differ. Several states now impose commercial financing disclosure obligations that reach brokers, which is a disclosure regime rather than a duty of loyalty.

Where this one catches people

The person you spoke to for two weeks is not the lender, cannot bind the lender, and has no authority to modify anything. Verbal assurances — "we'll reconcile if sales drop", "you can pay off early at a discount", "this won't file a UCC", "we'll refinance you in 90 days into something cheaper" — are made by someone who is not a party to your contract, and the contract contains an integration clause stating that it is the entire agreement and that no representation outside it is binding. That clause exists precisely to make those statements unenforceable. If a promise matters, it must appear in the funder's document, signed by the funder. Second consequence: submitting your file to a dozen funders means a dozen sets of hands on your bank statements and phone number, which is why the calls do not stop after you fund.

Worked through

Illustrative. A funder issues a buy rate of 1.30 on a $50,000 purchase price with 4 points of commission available. The ISO presents the merchant 1.38 with no visible broker fee.

At the buy rate the merchant would owe $65,000. At the presented rate the merchant owes $69,000. The $4,000 spread is the ISO's, plus $2,000 of points deducted at funding, so the merchant receives $48,000 and repays $69,000.

The merchant sees one number — 1.38 — and no line item labelled commission.

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

Merchant Cash Advance Working Capital Term Loan Revenue-Based Financing

Read next

Buy rateThe price the funder is willing to fund at, before the broker's markup, with the gap between it and the rate … Factor rateA multiplier applied to the funded amount that fixes the total dollars to be remitted. It is a price, not a r… ISO agreementThe contract between a funder and the sales organization that brings it deals, setting commission, clawbacks … Integration clauseThe provision stating that the signed document is the complete and final expression of the deal and supersede… Loan brokerAn intermediary who places a borrower's file with lenders for a commission, sitting between the business and … Origination feeA charge for putting the transaction on the books, usually deducted from the disbursement rather than billed,… Sell rateThe rate written on the paper the merchant signs, as distinct from the buy rate the funder approved at — the … StackingTaking an additional advance or loan while an existing one is outstanding, so two or more fixed debits run ag…

Independent sales organization — common questions

What does independent sales organization mean?

A sales firm that originates funding applications and places them with funders for a commission — the party most merchants actually deal with, and not the party whose money is at risk.

Where does independent sales organization catch people out?

The person you spoke to for two weeks is not the lender, cannot bind the lender, and has no authority to modify anything. Verbal assurances — "we'll reconcile if sales drop", "you can pay off early at a discount", "this won't file a UCC", "we'll refinance you in 90 days into something cheaper" — are made by someone who is not a party to your contract, and the contract contains an integration clause stating that it is the entire agreement and that no representation outside it is binding. That clause exists precisely to make those statements unenforceable. If a promise matters, it must appear in the funder's document, signed by the funder. Second consequence: submitting your file to a dozen funders means a dozen sets of hands on your bank statements and phone number, which is why the calls do not stop after you fund.

Is independent sales organization the same as an interest rate?

Independent sales organization 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 independent sales organization apply to?

Merchant Cash Advance, Working Capital, Term Loan, Revenue-Based Financing.

Is there a worked example of independent sales organization?

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 independent sales organization?

Buy rate, Factor rate, ISO agreement, Integration clause, Loan broker.

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.