What a funding broker actually does, and how the money reaches them

Most non-bank business funding in the United States is originated by intermediaries rather than by the funder's own staff. If you filled in a form online, the person who called you almost certainly does not work for whoever ends up funding you. That is not a scandal; it is the shape of the market. But it is worth understanding, because the intermediary's economics sit inside the price you are quoted.

The work, when it is done properly

A broker who does those four things has earned something. A broker who takes your documents, forwards them to a list, and reads you back the first offer that arrives has done the first half of one of them.

How they are paid

There is no single model, and you should not assume one. The structures in use:

You will notice that in every version, the money originates with you. The only variable is whether it is visible.

No typical percentage is quoted here, because there is not an honest one: compensation varies by funder, by product, by deal size and by negotiation, and any market figure you read is someone's estimate. Ask for your own number instead, in writing: how are you compensated on this specific deal, by whom, and how much? A straight answer is a good sign. Reluctance is information too.

What the structure does to the advice

Commission on the funded amount means the intermediary is paid more when you take more. Not when you take the right amount, and not when you take the cheapest option. Renewal commissions mean there is money in you coming back before the current deal is finished — which is why a call offering "additional capital" often arrives at the point where the balance is part paid and a renewal is most profitable to write.

None of this makes the person dishonest. It means the incentive points one direction, and you should apply that knowledge to any suggestion that you take more than you asked for.

The written agreement

Many intermediaries ask you to sign something before they submit anything. Read it. The clauses that matter:

• Exclusivity. Does it stop you approaching funders yourself, or working with anyone else, and for how long?
• A fee owed regardless of source. Some agreements provide for a fee if you obtain funding from anyone within a period, even a funder they never contacted.
• Authorisation to submit. Does it authorise submission to named parties, or to unlimited "funding partners"? The second is how a file gets shotgunned.
• Credit pull consent. How many, and hard or soft.
• What happens to your documents afterwards — retention, sharing and whether your contact details are treated as a lead they can sell.

The one rule with no exceptions

Do not pay a fee upfront in exchange for a promise of funding. Legitimate compensation in this market is paid at funding, out of the deal. Advance-fee arrangements — a "processing fee", a "commitment deposit", an "underwriting retainer" paid to an intermediary before any money exists — are the standard shape of a funding scam, and the FTC has material on the pattern at ftc.gov. Genuine third-party costs on larger transactions do exist, such as an appraisal or a field exam ordered from an independent firm, and those are payable to the firm doing the work, documented, and normally arranged after a written term sheet.

Questions worth asking before you send documents

1. Are you a broker or the funder? If a broker, who will you submit to?
2. Will you get my agreement before each submission, by name?
3. How are you paid on this deal, by whom, and how much?
4. Is the price I have been quoted the funder's price, or does it include your spread?
5. What is your fee if I decline every offer you bring?
6. Who keeps my documents, and who else sees them?

There is nothing rude about any of these. The person asking you for six months of bank statements and a Social Security number can answer six questions about themselves.