Buy Rate
The buy rate is the wholesale factor rate at which a funder will purchase a deal from an ISO or broker — the funder's cost of capital plus minimum target margin — with the difference between buy rate and sell rate (the merchant-facing factor rate) representing ISO commission opportunity.
Why This Matters
Buy-rate vs. sell-rate spread is the commercial structure underlying ISO and broker compensation. A funder may quote a 1.25 buy rate to its ISO network — meaning the funder will accept and price the deal at 1.25 factor. The ISO sells the deal to the merchant at 1.32 sell rate (buy rate plus broker margin). The 0.07 spread represents the ISO's commission, paid by the funder at funding. ISOs negotiate buy rates with funders based on submission volume and approval quality; high-volume ISOs secure better buy rates that enable competitive sell-rate pricing to merchants.
Example
$50K deal: Funder buy rate 1.25 ($62,500 funder collection), ISO sell rate 1.35 ($67,500 merchant payback). The $5,000 spread is the ISO's commission. Funder collects total $67,500 from merchant, retains $62,500 ($12,500 funder margin), pays $5,000 to ISO at funding.
Frequently Asked Questions
Frequently Asked Questions
How are buy rates set by funders?
Based on funder cost of capital, target portfolio yield, and competitive pressure for ISO submission flow. Top-volume ISOs secure 0.05-0.10 better buy rates than low-volume submitters. Funders may publish standardized buy-rate sheets or negotiate deal-by-deal for larger submissions.
What's the typical buy-rate-to-sell-rate spread?
0.05-0.15 spread is typical, equating to 5-15% commission on funded amount. Top ISOs working with competitive funders maintain 0.07-0.10 spreads as standard. Larger spreads may apply to specialty programs (high-risk verticals, second-position) where ISO sales effort justifies higher commission.