When a funding offer arrives by phone or email, there is usually a company in the middle: a broker who took your file, shopped it to funders, and will be paid a commission if you sign. The commission is real money — often a meaningful slice of your total payback — but you will not find it on a line item, because it is baked into the factor rate itself. Understanding that mechanism explains most of what feels wrong about the funding market.
How the broker channel prices a deal
The broker's job is distribution: find businesses that need capital, package the file, and place it with a funder. The funder pays the broker a commission calculated on the deal — and recovers it in your rate. That is why broker-sourced advances commonly land in the mid-1.3s to mid-1.6s per dollar advanced: the rate is carrying the funder's margin, the funder's risk premium on a file it can only see from the outside, and the sales channel's cut.
Note what the commission is calculated on: the size and total payback of the deal. A bigger advance at a higher factor pays the broker more. The person structuring your offer is compensated in exactly the direction that costs you most — not because brokers are villains, but because that is how the channel's arithmetic works.
What happens to your file
Placing a deal means circulating it. Your statements, your volume, your contact details move through the funders the broker works with — and files have a way of outliving the deal. The months of calls many business owners get after a single funding inquiry are that circulation working as designed.
The renewal treadmill is part of the same machine. Commissions are paid per deal, so the channel's incentive is another deal: a top-up, a refinance, a second position. Each renewal restarts the commission clock. Businesses that entered for one gap and are still remitting three deals later did not stumble into that pattern — it is the channel's revenue model.
What direct pricing changes
A funder that already sees your revenue — because your card processing settles through it — needs neither the distribution channel nor the guesswork premium. No commission is being recovered in the rate, and underwriting reads your actual settlement history instead of a scanned statement. That is the structural reason direct funding can cost about half of what a broker-sourced advance costs, and it is arithmetic, not generosity.
The alignment is different too. A funder whose durable revenue is your processing relationship earns when your business keeps operating — not when you re-enter the funding cycle. That changes what gets offered: sizing your volume supports rather than the maximum your desperation might sign for.
Four questions that surface the middle
Ask who is actually funding the advance — the name on the agreement, not the brand on the email. Ask for the total payback in dollars, fees included. Ask directly whether anyone other than the funder is compensated on the deal, and how that compensation is calculated. And ask for the disclosure your state requires: several states now mandate a cost disclosure with a worked example for commercial financing, and a provider's reaction to that request tells you plenty.
None of this makes brokers evil — distribution costs money in every industry. But you should know the commission exists, that it lives inside your rate, and that its incentives point away from you. Lombard's answer is structural: no broker channel, funding priced on settlement we can see, and the comparison published on our funding page.