An ISO (Independent Sales Organization) is a broker — they originate MCA applications and submit them to direct funders who hold the actual capital. ISOs earn commissions (2–10 points) built into your factor rate. Direct funders deploy their own capital and set their own terms. Working with a direct funder typically means better pricing for strong applications. ISOs add value for complex deals by matching applications to specialized funders. T.A.G. operates as a direct funder with broker relationships for situations where direct funding isn't optimal.
The MCA Distribution Channel Explained
When a small business gets a merchant cash advance, the money can flow through two distinct paths. Understanding which path you're on affects your terms, your costs, and who has authority over your account.
(originates, submits, earns commission)
(holds capital, sets terms, holds advance)
(originates + funds + holds advance)
What an ISO Does
ISO stands for Independent Sales Organization. In the MCA industry, ISOs are companies or individuals licensed by funders to originate merchant cash advance applications. What ISOs actually do:
- Market to merchants — generate leads through advertising, referrals, or outbound sales
- Collect applications and documents — bank statements, voided check, ID, etc.
- Submit to multiple funders — "shop" the deal to find the best approval odds or terms
- Present offers — explain terms, advance amount, factor rate, holdback to the merchant
- Facilitate closing — get contracts signed, coordinate funding
- Earn commission — typically 3–8 points (3–8% of advance amount) paid by the funder upon funding
ISOs do not deploy their own capital. They are intermediaries. The contract you sign is with the funder, not the ISO. After funding, the ISO typically has no ongoing role — all servicing, holdback collection, and account management is handled by the funder.
- Access to multiple funders (higher approval odds for complex deals)
- Expertise in matching deal profiles to funders who specialize in them
- Can find approvals that a single direct funder might deny
- Experienced ISOs know which funders are fast, flexible, or generous for specific industries
- Commission is almost always built into your factor rate (you pay for it)
- ISO incentive may be to place the deal, not get you the best terms
- Less authority to negotiate or modify terms
- May submit to funders you didn't know about or approve
- Quality varies enormously — experienced vs. inexperienced ISOs differ dramatically
What a Direct Funder Does
A direct funder deploys its own capital (or capital from institutional credit facilities) to fund merchant cash advances. Direct funders:
- Set their own underwriting criteria — they decide what qualifies and what doesn't
- Make their own approval decisions — no submission to a third party
- Fund from their own capital — the money comes from their balance sheet
- Hold the advance — they own the purchased receivables, collect the holdback, and service the account
- Keep all factor rate income — no commission to split with a broker
- Can modify terms — with authority to change holdback rates, payoff terms, or renewal conditions
- No broker commission built into rate (potentially lower cost)
- Faster decisions — no third-party submission lag
- Single point of contact for all servicing
- More authority to negotiate or modify terms
- Can build a relationship for better renewal terms
- Single underwriting box — if you don't fit, you're denied (no other funders)
- May specialize in specific industries or profiles, excluding others
- May not be accessible without knowing to apply directly
- Some direct funders require higher minimums or are more restrictive
How ISO Commissions Affect Your Factor Rate
This is the most misunderstood part of the MCA distribution channel. ISO commissions are almost never disclosed explicitly to merchants — they're embedded in the factor rate.
| Scenario | Base Factor Rate (Direct) | ISO Commission | Merchant Sees | Cost on $50K Advance |
|---|---|---|---|---|
| Direct funder, no broker | 1.24 | 0 points | 1.24 | $12,000 |
| Through ISO (small commission) | 1.24 | 3 points (3%) | 1.27 | $13,500 |
| Through ISO (standard commission) | 1.24 | 6 points (6%) | 1.30 | $15,000 |
| Through ISO (high commission) | 1.24 | 10 points (10%) | 1.34 | $17,000 |
Illustrative example. Actual commission structures vary by funder-ISO relationship and deal size. Not all funders allow ISOs to add points freely — some cap maximum buyups.
What "buying up" means: When an ISO receives a 1.24 factor rate offer from a funder, they can choose to "buy up" the rate — quote the merchant 1.30 instead of 1.24, pocketing the 6-point difference as their commission. Some funders cap how much an ISO can buy up. Others leave it open. Reputable ISOs disclose this practice; less reputable ones don't.
ISO vs. Direct Funder: Full Comparison
| Factor | ISO / Broker | Direct Funder |
|---|---|---|
| Deploys their own capital | No — intermediary only | Yes |
| Sets underwriting criteria | No — follows funder guidelines | Yes |
| Earns commission | Yes — 3–10 points, built into rate | No commission — retains full factor rate |
| Typical factor rate impact | +0.03–0.10 added to base rate | Base rate (lowest available) |
| Access to multiple funders | Yes — can shop to best funder | No — single underwriting box |
| Contract is with | The funder (not the ISO) | The funder directly |
| Servicing and holdback | Handled by the funder | Handled directly by funder |
| Ability to modify terms | No authority — must go back to funder | Full authority to negotiate |
| Best for | Complex deals, lower credit, unusual industry | Strong applicants, standard profiles |
| Disclosure | Commission not always disclosed | All fees in contract with same party |
How to Tell Who You're Working With
- Ask directly: "Are you a direct funder or a broker?" Any legitimate company will answer.
- Check the contract: If the funding company name in the contract is different from the company you applied with, you went through an ISO.
- Look for "submitting to multiple funders": If they say this, they're an ISO — direct funders only submit to themselves.
- Ask about rate buyup: "Is your commission included in my factor rate?" If they can't answer, that's a red flag.
- Check who services the account: ISO relationships end at closing — if they stay involved in servicing, they may be a hybrid or direct funder.
T.A.G. — Direct Funder with Broad Reach
We fund directly when you qualify and broker to specialists when that gets you better terms. Transparent pricing. No hidden commissions.
Apply NowFrequently Asked Questions
- What is an ISO in the MCA industry?
- ISO stands for Independent Sales Organization. An ISO is a third-party company or individual that originates MCA applications and submits them to funders for approval. ISOs don't deploy their own capital — they act as intermediaries, earning commissions (3–10 points) from funders when deals close. These commissions are almost always embedded in the factor rate you see.
- Does working with an ISO cost more?
- Usually, yes — ISO commissions (3–10 points) are typically built into your factor rate. A direct funder might offer 1.24; the same deal through an ISO might quote 1.28–1.34. However, ISOs that have volume relationships with funders sometimes access pricing that individual merchants can't — and for complex deals, the right ISO can get an approval and terms that a direct application would not.
- How can I tell if I'm working with an ISO or direct funder?
- Ask directly: "Are you a direct funder or a broker?" Check the contract — if the funding company is different from who you applied with, you went through an ISO. If they mention "submitting to multiple funders" or "shopping your deal," they're an ISO. Direct funders only have one underwriting box: their own.
- Is an ISO or direct funder better?
- For strong, straightforward applications (good deposits, solid FICO, clean statements), direct funders typically offer better pricing. For complex applications (lower FICO, younger business, unusual industry), an experienced ISO that knows which funders specialize in that profile can get approvals and terms you couldn't get directly. The ideal is a company that can do both.