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Points
Also called origination points, commission points, basis points.
Fees quoted as percentage points of the funded amount - one point equals one percent - used for origination charges, broker compensation and the spread over a buy rate.
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
The word does double duty and the two uses describe the same money from different sides.
Charged to the business, points are an origination or funding fee expressed as a percentage: three points on $100,000 is $3,000, deducted at funding in most cases.
Paid to a broker, points are commission. A funder's rate sheet states the maximum points it will pay on a given deal, and the broker earns them out of the transaction. On advances the broker may also add to the funder's buy rate, and that spread is additional compensation on top of the points.
Basis points - hundredths of a point - are used on bank and ABL pricing where the increments are finer.
Where this one catches people
Points quoted to a broker and points charged to a merchant are two conversations about one pot of money. 'We pay up to four points' is a commission ceiling, not the total cost to the merchant, and it does not include whatever the broker adds to the buy rate. On brokered deals, ask for the total dollars deducted at funding rather than a points figure.
Worked through
Illustration. A funder approves $80,000 at a buy rate of 1.28 and offers up to 4 points to the broker. The broker sells the deal at 1.38 and takes 4 points.
The merchant is charged $3,200 in points and owes $110,400 rather than the $102,400 the buy rate would have produced. The broker's compensation on this file is $3,200 plus a share of the $8,000 rate spread - and only the points figure appears anywhere on the merchant's paperwork.
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
Read next
Points — common questions
What does points mean?
Fees quoted as percentage points of the funded amount - one point equals one percent - used for origination charges, broker compensation and the spread over a buy rate.
Where does points catch people out?
Points quoted to a broker and points charged to a merchant are two conversations about one pot of money. 'We pay up to four points' is a commission ceiling, not the total cost to the merchant, and it does not include whatever the broker adds to the buy rate. On brokered deals, ask for the total dollars deducted at funding rather than a points figure.
Is points the same as an interest rate?
Points 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 points apply to?
Merchant Cash Advance, Working Capital, Term Loan.
Is there a worked example of points?
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 points?
Buy rate, Commission, Factor rate, Net funding, Origination fee.
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.