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Residual
Also called renewal commission, residual income, trail, back-end.
Ongoing compensation to a broker or ISO after the original transaction - processing residuals on card volume, or a share of commission on renewals of a merchant they placed.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Two distinct income streams travel under one word.
In card processing, a residual is a monthly share of the margin on a merchant's processing volume, paid for as long as the merchant stays on the platform. It is the reason processing portfolios are valued as assets and sold as such.
In advance broking, residual usually means renewal commission - a share of what the funder pays when the merchant renews, whether or not the broker was involved in the renewal. Some ISO agreements pay it in full, some at a reduced rate, some only for a defined period, and some not at all after the first deal.
Whether a residual survives is a drafting question, and the answer sits in the termination and survival sections rather than the compensation section.
Where this one catches people
Residual rights usually die with the ISO agreement. Read the termination clause: many agreements cut residuals entirely on termination for cause, define cause broadly, and let the funder terminate at will on short notice. A book with no post-termination residual protection is revenue you are permitted to receive, not an asset you own - and it cannot be sold on that basis.
Where you will meet this term
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Residual — common questions
What does residual mean?
Ongoing compensation to a broker or ISO after the original transaction - processing residuals on card volume, or a share of commission on renewals of a merchant they placed.
Where does residual catch people out?
Residual rights usually die with the ISO agreement. Read the termination clause: many agreements cut residuals entirely on termination for cause, define cause broadly, and let the funder terminate at will on short notice. A book with no post-termination residual protection is revenue you are permitted to receive, not an asset you own - and it cannot be sold on that basis.
Is residual the same as an interest rate?
Residual is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does residual apply to?
Merchant Cash Advance, Credit Card Processing.
Is there a worked example of residual?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside residual?
Commission, ISO agreement, Non-solicitation clause, Points, Portfolio.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.