ISO Business Funding: How ISOs Work and Get Paid (2026)

Key takeaways

ISO business funding is financing placed by an independent sales organization, an intermediary that finds business owners, packages their files and submits them to funders but doesn't lend its own money.
ISOs are usually paid in points, where one point is 1% of the funded amount, under a commission schedule set by each funder; on merchant cash advances that commission is typically built into the cost the business pays.
The funder, not the ISO, decides approval, amount, cost, terms and timing, so no ISO can guarantee approval or a funding date.
Rates are higher this fall: the Fed held the federal funds range at 3.75% to 4.00% on October 28, 2026, prime was 7.00% on November 3, and NFIB found the average short-term loan rate rose to 8.2% in September.
Commercial financing disclosure laws now cover at least 10 states, and brokers of sales-based financing in Texas must register with the OCCC through NMLS by December 31, 2026.

What is ISO business funding?

ISO business funding is financing a business owner gets through an ISO (independent sales organization): a company or person that finds business owners who need capital, packages their files and places them with funders. The ISO doesn't lend its own money. When a deal funds, the funder pays the ISO a commission.

The term comes from card processing. FunderIntel notes it was borrowed from the merchant services and credit card processing industry and carried into business lending. Today you'll hear "ISO" most in merchant cash advance (MCA) circles, but many ISOs place a range of products: short-term loans, merchant cash advances (also called revenue-based financing), equipment financing and lines of credit.

In practice, "ISO" and "broker" often mean the same job. When people draw a line, "ISO" tends to mean a company with direct agreements with funders and, sometimes, its own sales reps or sub-brokers underneath it. "Broker" can mean the individual making the calls. Either way, three facts hold:

The funder (a lender or MCA company) provides the money and carries the risk.
The ISO finds the business, gathers documents, submits the file and helps the owner compare offers.
The funder decides whether to approve, how much, at what cost, on what terms and how fast. The ISO doesn't.

Why ISO business funding looks different in November 2026

Three things changed the job this fall: the cost of money, how owners feel about borrowing, and a hard registration deadline in Texas.

Rates are higher than they were this summer

The Federal Reserve raised rates in September 2026, and the prime rate moved up to 7.00% on September 17 (PrimeRates). On October 28, 2026 the Fed held its target range for the federal funds rate at 3.75% to 4.00%, by a 10-2 vote; the two dissenters, Lisa Cook and Beth Hammack, wanted another 0.25 point increase, and the statement says "inflation remains elevated" (Federal Reserve FOMC statement, October 28, 2026). The bank prime rate, a base many banks use to price short-term business loans, was still 7.00% on November 3, 2026 (Federal Reserve H.15, November 4, 2026). The next Fed decision is due December 9, 2026 (FOMC calendar).

Small business owners are paying more to borrow

The NFIB (National Federation of Independent Business) September 2026 survey, released October 14, 2026, found the average rate on short-term loans rose to 8.2%, from 7.5% in August. A net 8% of owners said they paid a higher rate on their most recent loan than three months earlier. The NFIB Uncertainty Index rose to 90, well above its historical average of 68, and the Optimism Index slipped to 97.9 (NFIB Small Business Economic Trends, September 2026). The October survey comes out on November 10, 2026.

Texas brokers must register by December 31, 2026

Texas Finance Code Chapter 398 (from House Bill 700) requires providers and brokers of commercial sales-based financing, which includes merchant cash advances, to register with the Texas Office of Consumer Credit Commissioner (OCCC). Applications opened through NMLS (the Nationwide Multistate Licensing System) on September 1, 2026, and businesses already operating in Texas must register by December 31, 2026. New entrants must register before doing business in the state (FS Vector, August 2026).

What this means for you: with higher rates and more cautious owners, expect funders to look harder at bank statements and existing debt, and expect owners to ask more questions about cost. Lenders still set every rate and term. If you send any sales-based deals to Texas businesses, put the OCCC registration on your calendar now, not in late December.

ISO vs broker vs direct funder: who does what?

New brokers often mix these roles up, and so do business owners. The table sets them side by side.

Role	Provides the money?	Decides approval and terms?	How it's paid
Direct funder (lender or MCA company)	Yes	Yes	The cost the business pays: interest, fees or the factor rate
ISO	No	No	Commission from the funder when a deal funds
Broker or sub-ISO working under an ISO	No	No	A share of the ISO's commission, under their agreement
In-house sales team of a funder	No (the employer does)	No (the employer's underwriters do)	Salary, commission or both

One point matters most for trust: as The Smarter Merchant explains to merchants, an ISO is like a mortgage broker for business funding. It doesn't provide the money; it stands between the owner and the funder writing the check. Say this plainly to every client. It sets the right expectations about who approves the deal.

How an ISO business funding deal moves from call to close

Every funder has its own process, but most deals follow the same path.

Qualify the business. Find out what the money is for, how long the business has operated, its monthly revenue, and whether it already has loans or advances outstanding (in MCA talk, "positions").
Gather documents. Usually a signed application and recent business bank statements. Some funders also ask for tax returns, financial statements or a list of current debts. Each funder sets its own list.
Submit to funders that fit. Send the file only to funders whose rules the deal matches. Spraying one file to many funders wastes everyone's time and can hurt your relationships.
Compare offers. If funders approve, lay the offers side by side for the owner: amount, total cost, payment size and frequency, term, and any fees or prepayment terms.
Deliver the required disclosures. In states with commercial financing disclosure laws, the owner gets a standard cost disclosure before signing (more on this below).
Contract and funding. The owner signs with the funder, and the funder completes its final checks and sends the money.
Commission. The funder pays the ISO under the ISO agreement, usually after funding.

Tip: never tell an owner a deal is "approved" until the funder says so in writing, and never quote a funding date. Funders control timing, and late stipulations (extra conditions before funding) are common.

How do ISOs get paid?

ISOs are paid in points: one point is 1% of the funded amount. The commission schedule is set in the ISO agreement with each funder, and it differs by funder, product and deal. There is no standard rate.

Here is how the arithmetic works. Illustrations only; real commissions depend on each funder's agreement.

A funder pays 5 points on a $50,000 merchant cash advance: 5% of $50,000 is $2,500.
If a sub-broker brought the deal and your agreement with them splits commissions 60/40, they receive $1,500 and you keep $1,000.
The same 5 points on a $20,000 deal is $1,000, so smaller deals pay less for roughly the same work.

Where the commission comes from

The owner doesn't usually write the ISO a check. On MCAs, the commission is typically built into the cost of the advance (The Smarter Merchant), which means higher points can mean a more expensive deal for your client. That's the core tension in this business, and part of the reason disclosure laws exist. The ISOs that last are the ones whose clients come back.

What to read in an ISO agreement

The commission schedule, and whether it changes by product or deal size.
When you're paid, and whether commissions can be taken back (a "clawback") if the deal defaults or is paid off early.
Who owns the client relationship, and whether you're paid on renewals.
Non-solicitation and confidentiality terms.
Your compliance duties, including disclosures and state registration.

What products do ISOs place?

FunderIntel lists the usual range: short-term loans, merchant cash advances, equipment financing and lines of credit. Each works differently, so learn them before you pitch them.

Product	What it is	How it's repaid
Merchant cash advance	A purchase of a share of the business's future sales, not a loan	A set share of sales or a fixed daily or weekly debit until the agreed amount is repaid
Short-term loan	A loan with a set term and payment schedule	Fixed daily, weekly or monthly payments
Line of credit	A credit limit the business draws on as needed	Interest on what's drawn; repaid and reused
Equipment financing	A loan or lease secured by the equipment	Fixed monthly payments over a set term

MCAs are priced with a factor rate, a multiplier on the amount advanced. Illustration only: a $50,000 advance at a 1.30 factor rate means the business repays $65,000, so the cost is $15,000 regardless of how quickly it's repaid. A factor rate isn't an interest rate, and states such as California now require the cost to be shown as an annual percentage rate (APR) so owners can compare.

Do ISOs need a license or registration?

There is no single federal license for brokering business financing. The rules come from the states, and they've grown fast. When Texas passed House Bill 700 in 2025 it became the tenth state to enact a commercial financing disclosure law since 2018 (Mayer Brown, June 2025). Trackers list California, New York, Utah, Virginia, Florida, Georgia, Connecticut, Texas, Kansas and Missouri, and some add Louisiana (CapitalMatch state tracker, October 2026).

Disclosure laws

These laws require a standard cost disclosure before the owner signs, much like consumer loan disclosures. Most of the work falls on the funder, but brokers have duties too, and you must never alter or skip the disclosure. California tightened its rules again: SB 362, effective January 1, 2026, requires providers to disclose the APR whenever they state a charge, pricing metric or financing amount to a prospective client (Venable, March 2026).

Broker registration

Virginia and Connecticut expressly regulate brokers of covered sales-based financing, and Texas requires covered brokers to register (FunderIntel). Several trackers add Missouri to the list of states that register brokers.

Texas in detail

Who: providers and brokers of commercial sales-based financing. Mayer Brown notes the registration duty isn't limited to deals under $1 million, even though the disclosure duty is (Mayer Brown).
When: by December 31, 2026 for businesses already operating, through NMLS. Registration renews every year, and registrants must give advance notice of certain changes, such as new key individuals or a new main address (Manatt).
Contracts: since July 9, 2026, sales-based financing contracts must include a notice that the OCCC enforces laws that apply to the contract and takes complaints (Counselor Library).
Practices: the rules treat failing to make accurate disclosures, filing a confession of judgment, and certain account debits as unlawful practices, and a provider may automatically debit a deposit account only with a first-priority security interest in all of the recipient's accounts receivable (Manatt).
Penalties: the OCCC may seek civil penalties of up to $10,000 per violation (Venable).

Fees

Some states limit what brokers can charge owners directly. Kansas, for example, bars brokers from charging advance fees (CapitalMatch tracker). The safest habit anywhere is to take no money from a client before a deal funds.

This isn't legal advice. State rules change often and depend on deal size, product and where the business is located. Check with the state regulator (in Texas, the OCCC) or a commercial finance attorney before you broker in a new state.

What federal rules should ISOs watch?

The main federal item is the small business lending rule from the CFPB (Consumer Financial Protection Bureau) under section 1071 of the Dodd-Frank Act. It requires covered lenders to collect and report data on small business credit applications. On May 1, 2026 the CFPB published a final rule that revised the 2023 version and moved compliance to January 1, 2028 (CFPB).

Under the revised rule, the coverage threshold is 1,000 originations, and covered lenders must still collect core data such as the application date, credit type and purpose, amounts applied for and approved, gross annual revenue, time in business and owners' demographic information (Venable, June 2026).

The duty sits with lenders, not ISOs. But if a lender you work with is covered, it may ask you to help gather certain application data before 2028. Ask your funders now how they plan to handle it.

How to run a clean ISO business funding shop

Guides written for merchants warn about sellers who push owners toward the highest amount rather than the right one, or use confusing language about cost (The Smarter Merchant). You can stand apart by doing the opposite.

Size the deal to the need. Ask what the money is for and how the business will repay it. Bigger isn't better for the client, even if it pays more points.
Show the full cost. Walk owners through the total repayment, the payment size and frequency, and the APR where your state's disclosure requires it.
Be clear about who decides. "I'll submit your file. The funder decides whether to approve and on what terms." No one can guarantee approval, and you should never imply it.
Watch stacking. Placing a new advance on top of existing ones (stacking) can leave a business with more daily debits than its sales can carry.
Keep records. Save applications, disclosures, offers and consents. Regulators such as the Texas OCCC have broad enforcement and investigation powers.
Vet your funders. Work with funders that give you written ISO agreements, deliver compliant disclosures and are registered where they must be.

How to get started as an ISO

If you're new, the path looks like this. Our guide on how to become a business loan broker covers each step in more depth.

Form a business entity and get an EIN (employer identification number). Texas NMLS registration, for example, needs IRS documents that exactly match the entity name and FEIN (FS Vector).
Check the rules in the states you'll serve, starting with registration in Texas, Virginia and Connecticut.
Sign ISO agreements with funders that cover the products your clients need. Read the commission and clawback terms first.
Build an intake process: a branded application, a document checklist and a way to track each file.
Find clients through referrals from accountants, bookkeepers and industry groups, and through content that answers owners' questions honestly.

Tip: start with one or two products you understand well rather than every product at once. Owners trust a broker who can explain the cost of an MCA against a term loan in plain numbers.

Where Fintology fits

Fintology is a white-label platform for business loan brokers and ISOs. It lets you run your brokerage under your own brand, with access to 4,500+ lending products from a network of 500+ lenders, so you can match each file to products that fit instead of relying on a single funder. See what's included on our pricing page.

Approvals, amounts and terms are decided by the lender offering each product and are never guaranteed.

Frequently asked questions

What does ISO stand for in business funding?

ISO stands for independent sales organization. In business funding it means a company or person that connects business owners with funders and is paid a commission when a deal funds, without lending its own money.

Is an ISO the same as a business loan broker?

Mostly, yes. The terms are often used interchangeably, though "ISO" usually suggests a company with direct funder agreements and sometimes its own sub-brokers, while "broker" can mean an individual.

How are ISOs paid?

ISOs are paid commissions, usually in points (one point is 1% of the funded amount), set in each funder's ISO agreement. As an illustration, 5 points on a $50,000 deal is $2,500; actual rates vary by funder and deal.

Do ISOs need to register in Texas?

Yes, if they broker commercial sales-based financing such as merchant cash advances. Texas Finance Code Chapter 398 requires covered providers and brokers to register with the OCCC through NMLS, and businesses already operating must register by December 31, 2026.

Who decides whether an ISO's deal is approved?

The funder does. It decides whether to approve a deal and sets the amount, cost, terms and timing, and an honest ISO says so up front.

Do ISOs charge business owners fees?

Usually the funder pays the ISO, and on merchant cash advances the commission is typically built into the cost of the advance. Some states, such as Kansas, bar brokers from charging advance fees, so taking no money before a deal funds is the safest practice.

Sources

Tori PorterFounder, Fintology

Tori founded Fintology to give brokers and lending teams one platform to brand, manage and fund their clients’ deals.

This article is general information, not legal, tax or financial advice. Rules vary by state and change often. Approvals, amounts, terms and commissions are decided by the lender offering each product and are never guaranteed.