Loan Broker (ISO)

A loan broker is a go-between. It finds borrowers, packages their requests and sends them to lenders, then earns a commission when deals fund. The broker doesn't lend its own money or make the credit decision.

In merchant cash advance (MCA) and small business funding, brokers are usually called ISOs, short for independent sales organizations. The term comes from card payment processing, where ISOs sign up merchants for processors. A business loan broker typically:

1. Finds a business that needs money, through marketing, referrals or past clients.
2. Collects the application, bank statements and ID.
3. Sends the deal to one or more funders that fit the request.
4. Presents the offers and helps the owner choose.
5. Collects the remaining documents, or stips, so the deal can close.

How commissions work. Pay terms are set in each broker's agreement with a funder. Pay can be quoted in "points," meaning percentage points of the amount funded. In a hypothetical deal, a broker earning 8 points on a $100,000 advance would receive $8,000. An agreement may also pay on renewals, or include a clawback: if the business defaults or pays off within an early window, the broker returns some or all of the commission. Some brokers also charge the business a fee.

Why it matters for lenders

For many MCA funders and online lenders, brokers bring in most of the deals. A good broker sends complete files that fit the funder's criteria. A weak one sends edited bank statements or hides other advances, which leads to stacking and early defaults.

Rules are growing too. In the US, there is no single federal license for commercial loan brokers, so the rules depend on the state. As of 2026:

• California generally requires a broker license to arrange commercial loans with licensed finance lenders.
• Florida bars commercial financing brokers from collecting advance fees, meaning fees charged before the deal closes.
• Texas requires sales-based financing providers and brokers to register with its consumer credit regulator by December 31, 2026, and to keep transaction records.

Several states also have commercial financing disclosure laws. These laws change often, so check each state's current rules. Mortgage brokers fall under separate licensing rules.

How it works in practice

A funder works with 40 ISOs. Its operations team approves each one before it can submit deals, gathering the signed agreement, a background check and any required state registration.

Each week the team reviews each ISO's deals submitted, funding rate and early defaults. One ISO's deals default at twice the average, so the funder pauses it.

In spreadsheets, commissions and clawbacks become monthly disputes. When each deal records its ISO, points and payments, the system works out what's owed.