- 1
Compensation, before signature
The broker states what it is paid on the transaction — the amount, who pays it, and how it is calculated — in writing, on or alongside the term sheet, before the borrower signs anything.
Why. SBA Form 159 already requires this for 7(a) loans. There is no principled reason it should apply to one product and not the other eight.
- 2
Cost expressed annually
Every offer is stated as an annual percentage rate, or as a spread over a named published index. A periodic rate — monthly, weekly, or a factor — may accompany that figure but never replaces it.
Why. A 1.75% monthly rate is roughly 23% a year. Quoting the period instead of the year is the single most effective way to make expensive money look cheap.
- 3
The whole stack, disclosed
The broker discloses every existing obligation it is aware of, and states where the proposed facility would sit relative to them in priority and in daily cash impact.
Why. A borrower cannot evaluate a new position without seeing the combined remittance. Brokers who place second and third positions rarely show that arithmetic.
- 4
No submission without authorization
No file is sent to any funder without the borrower's specific approval of that funder, by name.
Why. Shotgunning a file to forty funders generates inquiries, declines and solicitation calls the borrower never agreed to, and damages their ability to place the deal properly.
- 5
Declines reported back
The borrower is told which funders declined and the stated reason.
Why. It is the borrower's file and their credit. Withholding the reason keeps them dependent on the broker and prevents them fixing what is actually wrong.
- 6
Conflicts named at the point of referral
Any affiliate relationship, ownership interest, or referral compensation is disclosed at the moment the referral is made — not in a footer, and not afterwards.
Why. A referral to a related party is not improper. Concealing that it is a related party is.
- 7
Nothing is off-limits if it is disclosed
A broker adopting this standard may place any lawful product, including products it would otherwise avoid, provided every clause above is satisfied for that transaction.
Why. The problem in this market was never a particular product. It was that the price and the broker's incentive were both hidden. Disclose them and the borrower can make their own decision — which is the point.
Clause 7 is the one that matters
It is tempting to write a standard that simply bans the products with the worst reputation. We think that is the wrong instrument, and it is not honest about where the harm actually comes from.
A merchant cash advance disclosed properly — annualized cost stated, broker compensation stated, combined remittance stated, borrower fully informed — is a decision a business owner is entitled to make. The same advance sold at a factor rate with an undisclosed nine per cent commission buried inside it is not a decision at all, because one side has the arithmetic and the other does not.
The standard is about information, not prohibition. A broker who meets all seven clauses can place anything lawful. A broker who meets none should not be trusted with a term sheet, whatever they are selling.
For what it is worth, we still don’t originate advances — because stacking them closes off cheaper capital later and we would rather place the cheaper capital. That is our commercial judgment. It is not the standard.
Adopt it
This document is free to use, quote, adapt and republish, with or without attribution. There is no certification, no membership and no fee — those things turn standards into revenue and revenue into compromise.
If you are a broker who already works this way, say so publicly. If you are a borrower, the seven clauses are a checklist — ask whoever is placing your deal which of them they will commit to in writing, and notice what happens.