ISOs can play a role in any merchant cash advances they sell. The opportunity is called co-funding or syndication, and it enables an ISO to fund a portion of the advance–up to 50 % in most cases. The monthly payback percentage becomes an additional income channel.
“It allows them to see a tremendous yield from just one relationship,” said Stephen Sheinbaum, president of Merchant Cash and Capital, a New York-based cash-advance provider.
The payback also differs from a commission, noted Levi Rosenblum, co-founder of 1st Merchant Funding, a Miami-based advance provider. “They still get that. It creates more motivation for an agent to sell an advance,” he said. “Co-funding has not been around for very long, but we are seeing more interest in it.”
1st Merchant Funding considers an ISO for syndication only after it has completed three to five successful cash-advance sales with the company, Rosenblum said.
But experience is a two-way street, adds Janinne Dall’Orto, a manager at consulting firm First Annapolis. “Rewards could be high only if the [cash-advance] company partnering with the co-funding ISO is experienced in the business and has sound underwriting practices,” she said.
AdvanceMe, operated by Capital Access Network, is rare among cash-advance firms in not offering co-funding, but CEO Glenn Goldman said he has not ruled it out. “Some funding companies got into it because they lost their lines of credit,” he said. “That shouldn’t be the reason. It should be aspirational.”
Principis Capital is open to co-funding with ISOs, but it is not for everyone, noted CEO Jane Prokop. “A lot of ISOs ask about it but do not go any further with it,” she said. “It’s not part of the ISO business model to put capital at risk. When it comes time to write the check, some ISOs find that it’s not something they want to do.”
