Should you co-broker? Rick from Metromedia Talks About It

Everyone has been there, the deal you know that could fund, but it is not going to fund with your funders. You know that merchant will find the solution if you don't, and this is how you make a living.

Sounds familiar doesn't it...

Co-brokering a deal in the merchant cash advance space is dangerous because if you are not careful, you could be eating a bad deal and destroying a relationship you worked hard to build. Before you "jump in the car" on a deal, you need to look at who you are jumping in with.

TIP #1

Talk to the funders about a possible co-brokering scenario before you start sending deals over. Find out if the other party is already signed up as an ISO; if they are, you should question why you should work with them if they could have gone direct. That should be a red flag. Of course, it will take the ISO manager of that funder to be honest about it and respect your relationship, and you won't be able to do this with everyone. You take a risk of that ISO manager going around you and onboarding that shop and cutting you out of the deal, which brings us to the next tip.

TIP #2

Don't co-broker with someone you don't trust. Everyone needs to earn their keep, a co-brokering situation is great if you have someone that is good at opening deals, but the other party is better at closing them. Whichever company is holding the ISO with the funder is ultimately responsible for that deal, so you need to make sure that you trust the merchant and the broker. If you don't have a good feeling about it, don't do it.

Pros and Cons

Opening better opportunities for your merchant even outside of the merchant cash advance space brings value to your shop and to your relationship with your merchant. In an industry where backdooring is seen often; when you collaborate with another broker you should both work together to stay in control of the file. The cons are that you cannot control the relationship of the shop that has the ISO and you have to work with them, that is why it is important to only co-broker with someone that will earn their keep. We see several co-brokering scenarios at Metromedia Funding Solutions with the real estate backed deals like secured advances and lease buybacks. It should be a mutually beneficial relationship too.

Why should you or when should you co-broker?

First off, make sure that you are only co-brokering deals that you originated, they should not belong to another unsuspecting broker, the funders nor the ISO shops involved will not benefit because you still have a 3rd person controlling the deal.

Co-brokering is good for shops that have minimum-sized deal requirements, some shops won't deal with micro deals while others do. Some shops do not deal with asset-based products, these are great candidates for a possible collaboration.

Rick's take:

Co-brokering is not to be used to "stack up merchants." It must be remembered that a stacked merchant is not a win for anyone. If you have a merchant that needs an asset-based product and you only sell merchant cash advances, it is a good idea to work with someone that is familiar with that space so you can get the deal done rather than just "signing up with someone." There is a flood of new ISO's in the space and deals that could close are often lost because the ISO is not aware of how labor intensive they can be. I have worked many of these deals with newer ISO's, and there are several veterans that have learned along the way it is better to work with someone that understands the space.

Communication is key- in closing

You have to have a strong communication base between the ISO shops, the funder, and the merchant, Be morally responsible, don't steal from each other, if that merchant contacts you directly you should be a stand-up person and make it known to the other shop. If you cannot trust the parties you are working with to do this, then do not co-broker with them. Earn your keep in every deal and work hard with each other, you will find that you get twice as much done in half the time.

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