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Spread
Also called broker spread, markup, points.
The difference between the terms a funder is willing to write — the buy rate — and the terms presented to the merchant, which is where broker compensation comes from.
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
A funder issues an approval with a wholesale price: a factor, a term, a payment frequency. The broker may present that price as-is and take a flat commission, or may mark it up. Markup can be applied in several ways that look different to a merchant and are economically similar: raising the factor, adding upfront points deducted at funding, extending the term at the same factor, or increasing the payment frequency.
Where the funder pays commission, it is typically calculated on the funded amount and paid at funding, so it is money out of the advance the merchant received. Where the broker adds points, they are deducted at funding directly. Either way the merchant pays it; the question is only whether it is visible.
In bank and SBA channels the equivalent concept is the referral fee or packaging fee, and there the agency and the lender impose disclosure requirements on what may be charged and by whom.
Where this one catches people
"There is no cost to you, the lender pays me" is technically accurate and practically misleading. The funder's commission is priced into the deal, and the broker's spread sits on top of a wholesale price the merchant never sees. The relevant question is not whether the broker is paid but what the buy rate was — and a broker who will not answer that has answered it.
Worked through
Illustrative only. Funder approves $80,000 at a 1.28 buy rate over 9 months. The broker presents 1.38 over 9 months. Payback moves from $102,400 to $110,400. The merchant's cost rises by $8,000 for an identical amount of money over an identical term, and nothing on the contract identifies the $8,000 as broker compensation.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Spread — common questions
What does spread mean?
The difference between the terms a funder is willing to write — the buy rate — and the terms presented to the merchant, which is where broker compensation comes from.
Where does spread catch people out?
"There is no cost to you, the lender pays me" is technically accurate and practically misleading. The funder's commission is priced into the deal, and the broker's spread sits on top of a wholesale price the merchant never sees. The relevant question is not whether the broker is paid but what the buy rate was — and a broker who will not answer that has answered it.
Is spread the same as an interest rate?
Spread 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 spread apply to?
Merchant Cash Advance, Working Capital, Term Loan.
Is there a worked example of spread?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside spread?
Buy rate, Commission, Factor rate, Independent sales organization, Origination fee.
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.