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Last updated: May 2026

ISO Broker Education

ISO Commission Structures Explained: MCA, SBA, Equipment, AR Financing, and Working Capital

ISO commission structures in commercial finance are more nuanced than a single percentage figure. The product type, deal size, funder relationship, whether the ISO controls the spread or earns a fixed split, and whether multiple brokers are in the deal chain all affect how much an ISO actually earns on any given funded transaction. This guide breaks down how commissions work across every major commercial finance product — with specific numbers, worked examples, and the details that most overviews leave out.

Become a Referral Partner ISO Lending Overview
  • MCA buy rate / sell rate spread mechanics (10–15% of funded amount)
  • SBA referral fee regulations (capped at 1%)
  • Equipment finance dealer reserve structure (2–5%)
  • AR financing and factoring residuals (1–3% monthly)
  • Working capital commission ranges (3–8%)
  • Split arrangements between brokers in a deal chain

Table of Contents

How ISO commissions are calculated

ISO commissions in commercial finance are almost always expressed as a percentage of the funded amount — the amount of money the funder actually wires to the borrower's bank account. One "point" equals one percent of the funded amount. An ISO who earns 3 points on a $150,000 funded deal collects $4,500 in commission from the funder.

There are two fundamentally different commission models in commercial finance, and understanding which one applies to each product type and funder relationship is essential for accurately modeling your income:

Fixed-percentage model: The funder pays the ISO a set percentage of the funded amount defined in the ISO agreement. The ISO has no control over the cost of capital presented to the borrower — the funder sets the rate, and the ISO earns the fixed split. This model is common for equipment finance, SBA referrals, and many alternative term loan programs.

Spread model (buy/sell rate): The funder gives the ISO a buy rate — the cost of capital at which the funder will fund the deal. The ISO can sell the deal to the borrower at any rate up to the funder's maximum allowed sell rate. The ISO earns the difference between the buy rate and the sell rate, multiplied by the funded amount. This model is the dominant structure in MCA and short-term working capital and is what enables the large commissions that make MCA attractive to ISO brokers.

MCA commission structure: buy rate, sell rate, and the spread

Merchant cash advance commissions are where the ISO channel earns its highest income — and where the largest commission disputes and clawback problems arise. Understanding MCA commission mechanics thoroughly is essential for any ISO who places these deals.

In the MCA spread model, the funder underwrites the deal and issues an approval with a buy rate — for example, 1.30. This means the funder will purchase $130,000 of the merchant's future receivables for a $100,000 advance. The buy rate is the funder's floor — you cannot present a deal at a rate lower than the buy rate.

The ISO then determines the sell rate — the factor rate at which to present the offer to the merchant. If the ISO sells the deal at a 1.40 sell rate, the merchant repays $140,000 on a $100,000 advance. The ISO earns the spread: (1.40 - 1.30) × $100,000 = 10 points = $10,000 in commission.

Most MCA funders allow sell rates up to 20–30 points above the buy rate. At the maximum spread, a $100,000 MCA deal can generate $20,000–$30,000 in ISO commission. This is why experienced MCA brokers can earn substantial income on relatively few funded deals. It is also why the regulatory environment around MCA disclosure is intensifying — high sell-rate commissions create pressure to maximize the spread at the merchant's expense.

Practical commission guidance: Most professional MCA ISOs operate at 10–15 points over buy rate as a standard practice rather than always maximizing the spread. This balances income with client retention and appropriate pricing. Merchants who are significantly overcharged are less likely to renew, less likely to refer others, and more likely to complain or default. The best long-term ISO economics come from fair pricing on recurring client relationships, not from extracting maximum spread on one-time deals.

Working capital loan commissions

Short-term and medium-term working capital loans — typically defined as business loans with terms from 3 to 36 months and daily or weekly ACH repayment — use a similar commission model to MCA but with more variation in how commissions are expressed and structured. Some funders pay a fixed percentage split; others allow the ISO to set an origination fee that is added to the cost of capital.

Working capital commissions typically run 3%–8% of the funded amount for shorter-term products (3–12 months) and 1.5%–4% for medium-term products (12–36 months). The range is wide because product pricing, funder economics, and ISO volume tiers vary significantly. Higher-risk, shorter-term deals at aggressive rates command higher commissions; longer-term loans at lower rates — which require stronger borrower profiles — carry lower commissions reflecting the funder's lower yield margin.

Loan Term Typical Commission Range Structure Clawback Window
3–6 months 5%–8% of funded amount Spread model or fixed split 30–60 days
6–12 months 3%–6% of funded amount Spread model or fixed split 30–60 days
12–24 months 2%–4% of funded amount Fixed split, origination fee 30–45 days
24–36 months 1.5%–3% of funded amount Fixed split, origination fee 30 days or none

Equipment finance dealer reserve and commission structure

Equipment financing uses a different compensation vocabulary than MCA and working capital products. The term most commonly used is "dealer reserve" — the amount the equipment finance company holds back from the initial payment to the dealer or ISO as protection against early payoffs, and then releases over time or at deal maturity. The economics work similarly to an ISO commission, but the timing of payment and the structure of the holdback differ.

In a standard equipment finance ISO arrangement, the commission (often called dealer reserve or broker fee) runs 2%–5% of the financed amount. On a $200,000 equipment loan, that represents $4,000–$10,000 in broker income. For captive programs tied to specific equipment manufacturers or dealer networks, the rate structure may be different — sometimes lower if the funder provides significant marketing support, sometimes higher if the dealer is providing financing exclusively through the captive program.

Equipment finance commissions are generally lower than MCA on a percentage basis but are earned on larger average deal sizes, carry much lower clawback risk (equipment is collateral, and funders can repossess), and rarely involve the credit deterioration problems that drive MCA clawbacks. A portfolio of equipment finance deals is significantly more stable income than a comparable portfolio of MCA deals.

For ISOs who work with contractors, construction companies, restaurant owners, medical practices, or transportation businesses, building equipment finance funder relationships alongside MCA relationships materially improves income stability and deal quality. More detail is in our guide on building a lender panel.

AR financing and factoring commissions: the residual income model

Accounts receivable financing and invoice factoring have a fundamentally different commission structure from MCA and term products — and for ISOs who understand this, they represent the most attractive long-term income opportunity in the commercial finance channel.

In factoring and AR financing, the ISO earns an upfront commission when the client is set up and the facility is established — typically 1%–2% of the initial facility size or first month's funded invoices. But the real value is the ongoing residual: a monthly payment equal to a small percentage (often 0.1%–0.3%) of the outstanding invoice balance or drawn amount, paid as long as the client continues using the facility.

On a $500,000 factoring facility with a 0.2% monthly residual, the ISO earns $1,000 per month — $12,000 per year — from a single client relationship, indefinitely. A book of 20 active factoring clients generating average monthly residuals of $800 per client produces $192,000 annually in passive income that does not require ongoing deal origination work to sustain.

The trade-off is that factoring and AR financing deals take longer to set up, require B2B businesses with commercial invoices, and have a longer learning curve than MCA. But for ISOs with access to B2B businesses in manufacturing, distribution, staffing, or professional services, building an AR book is one of the most valuable income-building strategies in the commercial finance broker toolkit.

SBA loan commissions: regulatory limits and structure

SBA loan commissions are unique in commercial finance because they are regulated by the Small Business Administration itself. The SBA places limits on referral fees and broker fees to protect borrowers from being overcharged for loan placement services. These limits apply to everyone in the chain — the ISO, any master ISO, and any referral partner involved in placing the deal.

For SBA 7(a) loans, the SBA limits referral fees (paid to parties who refer but do not package the loan) to 1% of the loan amount for loans under $1 million, and less for larger loans under some program structures. Packaging fees — for brokers who actually prepare the SBA application, gather documentation, and present the complete package to an SBA lender — have separate limits and must be disclosed to the borrower and the lender.

The regulated nature of SBA commissions means these deals will never generate the same percentage income as MCA or short-term working capital products. But SBA deal sizes are substantially larger — $500,000 to $5 million is common — which means even a 1% referral fee represents $5,000 to $50,000 in income on a single deal. Combined with the value of being the advisor who helped a client access competitive financing, SBA referral income is worthwhile even at regulated rates.

For a detailed guide on how ISO brokers work with SBA products, see our page on how to place SBA loans as a broker.

Full product commission comparison

The table below provides the comprehensive commission reference for ISO brokers working across all major commercial finance product categories.

Product Commission Range Structure Residuals? Clawback Risk
MCA (full spread model) 10%–15% of funded amount Buy/sell rate spread Renewal bonus only High (full or pro-rated, 30–90 days)
MCA (fixed split model) 2%–5% of funded amount Fixed percentage split Renewal bonus only High (full or pro-rated, 30–90 days)
Short-term working capital (3–6 months) 5%–8% of funded amount Spread or fixed split Rarely Moderate (30–60 days)
Medium-term working capital (12–36 months) 1.5%–4% of funded amount Fixed split + origination fee Rarely Low–moderate (30 days)
Equipment finance 2%–5% of financed amount Dealer reserve No Low (asset is collateral)
Invoice factoring 1%–2% setup + 0.1%–0.3%/month Upfront + monthly residual Yes — monthly while active Low (invoices are collateral)
AR revolving facility 1%–2% setup + monthly residual Upfront + monthly residual Yes — monthly while active Low
Business line of credit 1%–2.5% of approved limit Fixed split on draw or approval Sometimes on drawn balance Low–moderate
SBA 7(a) referral 0.5%–1% of loan amount Regulated referral fee No None typical
Commercial real estate bridge 0.5%–1.5% of loan amount Broker fee at closing No None typical

Split commission arrangements between brokers

Many commercial finance deals travel through more than one party before reaching a funder. A referring broker might identify a deal through their existing client base but lack a funder relationship for the specific product. They pass the deal to a master ISO who has the funder relationship and handles submission. The funder pays the master ISO the full ISO commission, and the master ISO splits with the referring broker according to a separate agreement.

Split arrangements are governed by a separate agreement between the ISO parties — not by the ISO-funder agreement, which only covers the relationship between the funder and the ISO who signed it. The referring broker's rights to their split come from their agreement with the master ISO, not from any direct relationship with the funder. This is why reviewing the terms of any referral or sub-ISO agreement before sending deals is critical.

Deal Source Structure Typical Split Who Gets What Key Risk for Referring Broker
Referring broker → Master ISO → Funder 50/50 or 60/40 Master ISO keeps 50%–60%; referring broker gets 40%–50% Master ISO controls commission receipt and disbursement
CPA / advisor referral → ISO network → Funder 20/80 to 30/70 ISO network keeps 70%–80%; referral partner gets 20%–30% Referral agreement must define protection period and split clearly
Sub-ISO → Master ISO → Funder 60/40 to 70/30 Master ISO keeps 60%–70%; sub-ISO gets 30%–40% Sub-ISO dependent on master ISO's funder relationship quality
Direct ISO → Funder (no split) 100% to ISO ISO keeps full commission ISO bears full clawback risk; requires direct funder agreement

The referring broker's most important protection in any split arrangement is having a written agreement that specifies: the exact commission split, who receives the funder payment first, the timeline for passing the referring broker's share, what happens if the funder issues a clawback, and what the prospect protection period is after the deal closes. A handshake split agreement creates the same disputes as any undocumented business arrangement.

Building residual income in commercial finance

The vast majority of commercial finance ISO income is transactional — earned when a deal funds, gone when the deal payoff period ends. Building a meaningful residual income stream requires intentionally targeting products and deal structures that pay ongoing commissions. For ISOs who want to transition from a purely transactional income model to one with passive recurring revenue, the following strategies are the most practical path.

  • Build an AR and factoring book. As covered above, factoring and AR financing pay monthly residuals as long as the client continues using the facility. These clients often stay on facility for years — and the relationship requires minimal ongoing maintenance once the account is established. Every factoring client you place is a long-term income stream, not a one-time commission. ISOs who deliberately target B2B businesses for AR placements build a passive income foundation alongside their active deal origination business.
  • Focus on line of credit programs with residual structures. Some fintech lenders and community bank programs pay residuals on drawn balances on revolving credit facilities. These are smaller residuals than factoring — often 0.05%–0.1% per month — but they add up across a portfolio of active revolving clients.
  • Prioritize renewal business. MCA and working capital funders offer renewal bonuses when a current client takes a new advance or loan. Proactively managing renewal relationships — timing outreach to clients who are 50–60% through their payoff period — generates income from the existing book without originating new prospects. Renewal economics are often better than first-time deals because the client has a repayment track record with the funder.
  • SBA 504 deals create long-term relationships. SBA 504 loans, used for owner-occupied commercial real estate and major equipment, create 10–25 year client relationships. While the referral fee is paid at closing, the client relationship and the ongoing financing advisory role can generate referrals, renewals on other products, and introductions to the client's network over a multi-year period.

Understanding commission structures at this level of detail is what separates a professional ISO broker from someone who just knows the basics. If you are evaluating a referral partner arrangement rather than a full ISO setup, the Axiant Partners network handles the commission structure complexity on your behalf — you earn a referral fee on funded deals without managing ISO agreements, clawback exposure, or split documentation. Start at axiantpartners.com/match.

FAQ

Questions about ISO commission structures

What is the total ISO commission in MCA and how is it structured?

In MCA with the spread model, the total ISO commission is the difference between the buy rate (what the funder charges) and the sell rate (what the ISO presents to the merchant), multiplied by the funded amount. At 10 points of spread on a $100,000 deal, the ISO earns $10,000. Total commissions of 10–15% of the funded amount are typical in the MCA spread model. In a fixed-split model, the ISO earns a set 2%–5% and has no control over the sell rate.

What is the difference between a buy rate and a sell rate in MCA?

The buy rate is the factor rate at which the MCA funder will fund the deal — the funder's floor. The sell rate is the factor rate the ISO presents to the merchant — which can be higher than the buy rate up to the funder's maximum. The ISO earns the spread between the two. If the buy rate is 1.35 and the ISO sells at 1.45, the spread is 10 points (10% of funded amount). ISOs control the sell rate and earn their commission from the spread, not from a separate payment by the funder.

How are SBA broker commissions structured?

SBA referral fees are regulated and typically cap at 1% of the funded amount for referral partners who do not package the loan. Packaging fees — for brokers who prepare the SBA application — have separate limits and must be disclosed to both the borrower and the lender. Unlike MCA commissions, SBA broker fees are disclosed and subject to SBA review. On a $1 million SBA 7(a) loan, a 1% referral fee is $10,000 — meaningful income despite the low percentage.

Do ISO brokers earn residual income in commercial finance?

Residual income is available primarily on factoring, AR financing, and some revolving line of credit programs. Factoring companies pay monthly residuals — typically 0.1%–0.3% of the outstanding invoice balance — as long as the client remains active. On a $500,000 active factoring facility, that is $500–$1,500 per month from a single client. Building a book of factoring clients creates meaningful passive income that does not require active origination work to sustain each month.

How do split commission arrangements work?

When a referring broker sends a deal to a master ISO who handles submission, the funder pays the master ISO the full commission, and the master ISO splits with the referring broker per a separate agreement. Common splits are 50/50 or 60/40 (master ISO/referring broker). The referring broker's rights come from their agreement with the master ISO — not from the funder. Always have a written agreement defining the split, payment timeline, clawback treatment, and prospect protection before sending deals to another broker.

How do deal size and product type affect ISO commissions?

Larger deals generally carry lower commission percentages — funders must offer competitive pricing to close large deals, leaving less margin for ISO commissions. Product type is the primary driver: MCA margins are much higher than SBA loan margins, which is why MCA commissions are far higher percentagewise. Short-term high-risk products pay more than long-term lower-risk products because the funder's yield is higher on the former, leaving more room for ISO compensation. Dollar income from a single large deal can still exceed a small-deal commission even at lower rates.

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Work with Axiant Partners

Whether you want to earn MCA-level commissions as a full ISO partner or referral fees on the deals you encounter as a CPA, consultant, or advisor, Axiant Partners has a transparent commission structure and a clear path to your first funded deal. Submit a deal or review the referral agreement to get started.

Become a Referral Partner Review the Referral Agreement ISO Lending Overview