Regulatory
How Brokers Are Compensated — and Why It Matters to You
Buy rate, upsell, and points on the back. Understanding broker economics tells you why two offers on the same file differ by thousands.
May 9, 2024 · 6 min read
Buy rate versus sell rate
A funder quotes the broker a buy rate — the cost at which it will fund the file. The broker presents a sell rate to the merchant. The spread, plus origination points, is the broker's compensation.
Two brokers submitting the identical file to the identical funder can therefore present materially different offers. The difference is not underwriting; it is markup.
What disclosure law now requires
California, New York, Utah, Virginia, Georgia, and Connecticut have all enacted commercial financing disclosure regimes, several of which reach broker compensation directly. The trend is unambiguous: the spread is becoming visible.
Ask for the disclosure sheet in every state, whether or not it is mandated. A funder or broker who resists is telling you something.
How to protect yourself
Work with one broker at a time and require them to name the funder before submission. Ask directly what points they are taking. Compare total payback, not daily debit.
Working with a direct funder removes the layer entirely, which is the simplest answer for most operators.