Referral Agreement Overview
A commercial lending referral agreement is a contract between a financing firm and a referral partner that defines the relationship, compensation, and protections for both parties. Brokers, vendors, advisors, and ISOs typically sign such agreements before submitting deals.
A commercial lending referral agreement establishes the legal relationship between the financing firm (or its designee) and the referral partner. It is not a broker agreement, employment contract, or joint venture. It defines a referral relationship: the partner introduces prospects; the financing firm evaluates and places them.
The agreement sets expectations before any deals are submitted. It answers: Who gets paid? When? Under what conditions? What happens if a deal defaults? Can either party bypass the other? Without a signed agreement, disputes over compensation and ownership can arise. See understanding clawbacks in referral agreements for more context.
Commercial lending referral agreements typically address the following. Specific terms vary by firm.
Prospect protection is one of the most important terms for referrers. It defines the window during which a referred prospect "belongs" to the referrer. If the prospect closes financing within that window—even months or years after the introduction—the referrer may receive compensation per the agreement.
Without prospect protection, a financing firm could receive an introduction, let the agreement expire, and then close the deal without paying the referrer. Prospect protection prevents that. Typical periods range from 24 to 60 months from initial introduction. See the Axiant referral agreement key terms for an example.
Clawback provisions allow the financing firm to recover referral compensation if a funded transaction later defaults, is rescinded, charged back, or causes the firm to return commission to the lender. This is standard in commercial lending. Lenders often require financing firms to return commission on defaulted deals; the referral agreement passes that risk to the referrer for their share.
Clawbacks align incentives: the referrer benefits when the loan performs. They also protect the financing firm from paying for deals that fail. Review clawback terms carefully—they vary by agreement. See understanding clawbacks for more.
A referral agreement typically covers introductions only. The referrer does not broker the loan, collect documents, or negotiate terms. They introduce the prospect; the financing firm handles the rest. See how advisors refer business loans for the process.
An ISO agreement may involve a broader relationship. ISOs (Independent Sales Organizations) sometimes originate or process deals, not just refer them. The commercial lending ISO program may use a referral agreement with ISO partners—the scope depends on the arrangement. Both define compensation and protections; the scope of activity may differ.
Brokers, ISOs, equipment vendors, CPAs, fractional CFOs, consultants, and other professionals who introduce business financing opportunities typically sign referral agreements. The agreement is required before submitting deals. Referral partners, those who send declined deals, and vendors who refer financing all operate under such agreements.
Review the full agreement before signing. Key terms to understand: compensation, payment timing, prospect protection, clawback, and non-circumvention. The Axiant referral agreement is available for review and download.
FAQ
A commercial lending referral agreement is a contract between a financing firm and a referral partner (broker, vendor, advisor) that defines how introductions work, how compensation is paid, and how both parties are protected. It establishes the relationship before any deals are submitted.
Typical terms include compensation structure (e.g., revenue share percentage), payment timing, prospect protection period, non-circumvention clauses, clawback provisions for defaults, confidentiality, and agreement term. Each agreement may vary.
Prospect protection defines how long a referred prospect remains tied to the referrer. If the prospect closes financing within that period—often 24 to 60 months—the referrer may receive compensation even if the agreement has expired. This protects the referrer's right to payment.
A clawback provision allows the financing firm to recover referral compensation if a funded transaction later defaults, is rescinded, charged back, or causes the firm to return commission. This is standard in commercial lending to align incentives.
Referral agreements typically cover introductions only—the referrer does not broker the loan. ISO agreements may involve a broader relationship where the ISO originates or processes deals. Both define compensation and protections; the scope of activity may differ.
Ready to refer deals?
Partners must review and sign the referral agreement before submitting opportunities.
