MCA Broker vs Direct Funder
Merchant cash advance broker vs direct funder: what changes for you.
A direct funder buys your future sales with its own money, so it can only offer its own terms. A broker like Afterfirst doesn't fund anything. It sends your file to several funders and brings their offers back to you. Brokers are usually paid by the funder, so ask how much and compare the offers themselves. Going direct saves a step. A broker gets you more than one offer to compare.
How do a broker and a direct funder compare?
| Direct funder | Broker | |
|---|---|---|
| Whose money | Its own | The funder's; the broker never holds the funds |
| How many offers | One, or a no | As many as the funders that fit send back |
| Who you pay back | The funder | The funder, the same as going direct |
| Who pays the broker | No broker | Usually the funder, from the deal |
| Where the broker's pay shows | Nowhere | In states like Connecticut and Virginia, on the disclosure form |
| If you're declined | You start over somewhere else | The broker can try funders with different criteria |
| Harder files | Depends on that one funder's rules | A broker can look for funders that take second positions or consolidations |
After funding, nothing about the broker touches your payments. The funder collects, and the funder answers reconciliation requests.
Does a broker make the advance cost more?
It can. The broker's commission comes out of the deal, and funders price deals to cover what it costs them to find customers. A direct funder has its own costs to find you too: ads, sales staff, lead lists. So the honest answer is that the only way to know is to compare the actual offers.
Some states now make that easier. Connecticut's disclosure form has a box for broker compensation paid from the financed amount. Virginia's required disclosures include broker compensation too. If your state has a form, read that line.
What does the difference look like in dollars?
Say you need $40,000. A direct funder offers 1.42. A broker comes back with two offers. Here's how to line them up:
| Direct offer | Broker offer 1 | Broker offer 2 | |
|---|---|---|---|
| Advance | $40,000 | $40,000 | $40,000 |
| Factor rate | 1.42 | 1.36 | 1.45 |
| Fees taken out | $800 | $1,200 | $0 |
| Cash that reaches you | $39,200 | $38,800 | $40,000 |
| Total payback | $56,800 | $54,400 | $58,000 |
| Cost per $1 you receive | $0.45 | $0.40 | $0.45 |
Broker offer 1 is cheapest per dollar even with the higher fee. Broker offer 2 has no fee but costs the same per dollar as going direct. Put your own offers into the offer comparison tool to see the same lines, including an estimated APR.
What should you ask before you choose?
What should you ask a broker?
- Do you charge me anything up front? In Florida, Georgia and Kansas, brokers generally can't collect advance fees from you.
- How are you paid, and how much is it in dollars on my deal?
- Will you talk with me before you send my file anywhere, and which funders will see it?
- Are you registered where my state requires it? Texas and Connecticut register brokers, and Missouri requires broker registration with a bond.
- Will every offer come back to me, or only the one you pick?
What should you ask a direct funder?
- Is this your money, or are you placing the deal with someone else?
- What's the payback, the fees, and the cash that reaches my account?
- Is there an early payoff discount, in writing?
- How does reconciliation work if my sales drop?
When does each one fit?
Go direct when you already have an offer you like from a funder you trust, your file is simple, and you don't need to compare. Use a broker when you want more than one offer, when a funder has already said no, or when you carry an open advance and need a second position or a consolidation.
Here's how we work: we read your file, talk with you before we shop it, send it only to funders that fit, and bring back every offer. Applying is free, and you never pay Afterfirst a fee. The funder pays our commission only if a deal funds, and the amount is in the offer paperwork before you sign.
Where do these facts come from?
- Connecticut Department of Banking guidance and disclosure form, Conn. Gen. Stat. §§ 36a-861 to 36a-872
- Code of Virginia, title 6.2, chapter 22.1 (sales-based financing)
- Florida Statutes § 559.9614 (prohibited acts by brokers)
- O.C.G.A. § 10-1-393.18 (Georgia commercial financing disclosures)
- Kansas SB 345, Commercial Financing Disclosure Act (session law)
- Texas Finance Code, chapter 398 (commercial sales-based financing)
- Revised Statutes of Missouri § 427.300 (commercial financing disclosure)
Behind on an advance, or about to be?
We can check whether consolidation or a reverse consolidation fits before anything gets worse. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.