Reading time: ≈ 8 minutes — grab coffee, save thousands.
Why you need this checklist
Your friendly “funding specialist” swears they’re getting you “the best deal on the market.” Cute. In reality, most commercial-finance brokers are paid like carnival barkers: the bigger the markup, the louder the smile.
Texas just fired the opening salvo against that circus with HB 700, a new law that forces brokers and merchant-cash-advance providers to disclose their compensation in writing for Texas businesses. (Round of applause, please.) Other states will follow, but until they do you must drag the truth out of your broker yourself.
Start with these six blunt questions. If your broker squirms, stalls, or hits you with word salad, walk.
1️⃣ “Exactly how—and how much—are you getting paid on this deal?”
Why ask? Money talks; conflicts shout.
What to listen for:
- Texas readers: Under HB 700, the broker must give you the dollar amount of their commission on any revenue-based financing or MCA offer. If they’re vague or “still waiting on numbers,” they’re violating state law—red flag flapping.
- Everywhere else: A legit answer sounds like, “We earn a flat 5 % of the funded amount, already baked into the factor rate. You don’t pay us anything separately.”
Translation: If the rep doubles back to “industry standard” or “it comes from the lender, not you,” assume the fee is plump.
2️⃣ “What’s the true cost of capital here—APR or effective factor cost included?”
Why ask? Factor rates are loan-math camouflage.
What to listen for:
- A straight-shooting broker can convert their shiny 1.35 factor rate into effective APR (hint: it’s often triple-digit).
- They’ll break out all costs: origination fee, wire fee, any closing costs deducted from proceeds.
Red flag: “It’s not a loan, so APR doesn’t apply.” Translation: “You can’t compare it, so trust me.”
3️⃣ “Besides your built-in commission, what other fees hit my side of the table?”
Take for granted that, if you didn’t go direct and you’re staring at a factor-rate offer, the rate already includes their commission. Fine—just get clarity. Now ask about extras:
Acceptable:
- Origination fee (1–4 %) withheld by the lender at closing.
Run-for-the-hills:
- Any broker charging additional points on top of that factor rate (“processing,” “consulting,” etc.). That’s double-dipping.
4️⃣ “Where else did you actually shop my file?”
Why ask? “Shopping around” too often means emailing three cronies and going with whoever pays the fattest kickback.
Expect a list: Bank X, Fintech Y, MCA Z. Push for hard numbers: How many lenders? Which ones? If they can’t name names, assume they didn’t bother.
5️⃣ “What happens to the daily/weekly payment schedule during my slow months?”
Why ask? Revenue ebbs; fixed payments don’t.
If your cash-flow dips, is there a “reconciliation” or adjustment? Legit MCA providers reconcile to actual sales; high-risk lenders just bulldoze your account. Your broker should know the difference and warn you.
6️⃣ “Did you submit (or even consider submitting) my application to a bank or SBA lender?”
Why ask? Conventional bank loans carry the lowest rates on the planet, followed by SBA loans. If you’re well-qualified and can wait 30–90 days, you deserve those terms.
Broker pushback you’ll hear:
- “Banks take forever, you said you needed cash fast.” Fair—if you framed it as “money by Friday,” the broker correctly zeroed in on short-term options.
- “You wouldn’t qualify.” Maybe… or maybe they didn’t want to wait months for a smaller commission.
Your move: If your credit is solid, financials clean, and you’re not in code-red urgency, insist they at least try a bank or SBA route. If they balk, find a broker (or direct lender) who won’t.
General Advice: How Many Points Are Hiding in That Factor Rate?
| Your Vibe | Broker’s Likely Commission | Translation |
|---|---|---|
| Desperate (“Need $75k by Friday!”) | 8–10 % (sometimes more) | They smell blood in the water. |
| Calm but Serious | 4–6 % | Garden-variety markup. |
| Chill / “Nice-to-have” Money | 1–3 % | Broker trims fat to close. |
Pro tip: Use posture to your advantage. Walk in stating, “We’re evaluating multiple options; speed is nice but not at any price.” Brokers “price it to move” when they sense you can (and will) walk.
Putting It All Together
Fire these six questions in one sitting. A real pro answers quickly, in writing, and without flinching. A fast-talker who hedges? Thank them for their time and exit stage left.
Remember: the single biggest predictor of your cost is how informed you are. Brokers prey on confusion; Diogenes demolishes it.
(And hey—if this saved you from a 10 % commission trap, toss us a donation so we can keep torch-lighting the cave.)
TL;DR
- How much do you earn? — Get the dollar figure.
- What’s my real APR? — Factor math into human math.
- Any extra fees on me? — If yes, bail.
- Where did you shop? — Demand a lender list.
- Payment flexibility? — Ask before slow season hits.
- Bank/SBA attempt? — If you qualify, insist on it.
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