00:00.000 --> 00:02.070
Sean Murray: The term that's
used in the industry is buy

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rate, I get why it would be
confusing to someone who has not

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been in the business before. The
buy rate is essentially the

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wholesale rate. It's what the
funder tells you is their a

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minimum amount that they need to
make on a deal. So the buy rate

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might be 1.20. That's the factor
rate, and they would tell you,

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this is the minimum amount that
we require to make on the deal.

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Now the broker needs to make
something too, so that's the

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minimum amount that they can
sell. They can upsell above the

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buy rate, and that spread is
their commission. So if the buy

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rate is 1.20, they could
theoretically sell the deal to

00:38.730 --> 00:43.680
the customer at 1.30. That would
mean let's say it's a $10,000

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deal. Let's run through an
example. I give you 10,000. I

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buy $12,000 of your future
receivables that so once you owe

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factor rate that's what the
funder requires to make the deal

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possible. Now you as a broker
need to get paid, how do you get

00:58.140 --> 01:01.680
paid? Well, you upsell that
1.20, so instead of 12,000,

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coming to buy 13,000 of your
future receivables, and that

01:05.700 --> 01:08.190
difference is going to be my
commission. So that's how the

01:08.190 --> 01:11.460
broker gets paid. You upsell the
buy rate. And that's why when

01:11.460 --> 01:16.800
you see ads that say, up to 15
points, up to 10 points, you as

01:16.800 --> 01:21.330
the broker have the discretion
to price the deal, as you wish.

01:21.540 --> 01:24.750
Johny Fernandez: So I have a
question. So as the broker that

01:24.780 --> 01:28.560
you're calling the shots of,
like, is there any limit? Or can

01:28.560 --> 01:34.230
the broker just use a certain
percentage? And kind of go based

01:34.230 --> 01:34.830
off of that?

01:34.840 --> 01:36.340
Sean Murray: Yeah, well, that's
a really good question. There is

01:36.340 --> 01:39.910
typically a cap, you can't just
charge whatever you want. Like,

01:39.910 --> 01:45.130
let's say the buy rate is 1.20.
Theoretically, you could charge

01:45.130 --> 01:49.000
1.90, right? Funders don't want
that to happen, because they

01:49.000 --> 01:51.700
need to manage their risk, they
don't want the customer to take

01:51.700 --> 01:54.250
a deal, that's going to be too
expensive. So they'll put a cap

01:54.280 --> 01:58.840
on what you can charge. And
that's why you'll see ads that

01:58.840 --> 02:04.420
say that the the deal can only
go up to 15 points or up to 10

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points, they're basically
limiting what you can charge

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above and above and beyond the
buy rate. So if it's up to 15

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points and the buy rate is 1.20
well, then the most you can sell

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is the 135.

02:14.740 --> 02:17.290
Johny Fernandez: And over the
years has that cap changed?

02:20.320 --> 02:22.510
Sean Murray: You know, a long
time ago, you didn't see 15

02:22.510 --> 02:26.680
points, on deals that didn't
happen. I think 10, 12 points

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was kind of a tie that got this
15 Point phenomenon is quite

02:30.700 --> 02:34.150
new, but the whole idea of by
rates was a natural progression

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of the industry. And that's
because when this business first

02:36.850 --> 02:41.290
started, there were essentially
just three deals that will be

02:41.290 --> 02:43.450
offered and it was kind of like
a take it or leave it type of

02:43.450 --> 02:45.040
thing. It wasn't very custom.

02:45.160 --> 02:45.460
Johny Fernandez: Okay.

02:45.510 --> 02:47.970
Sean Murray: Right. You could
you could offer this factor rate

02:47.970 --> 02:51.210
and the merchant didn't want it,
you'd be stuck trying to sell

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it. Or going back to the
underwriting department and

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saying, you know, what did we do
here, and then there was a lot

02:56.310 --> 02:59.730
of negotiating and waiting for
approvals. You know, maybe I can

02:59.730 --> 03:03.720
cut a point of my commission to
try to lower the deal, I used to

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do that, by the way, I would
have to go through all these

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different, you know, links in
the chain to try to get the deal

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that the customer wanted. And I
just wished that I could do it

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myself. So the buy rate just
gave that power to the broker,

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saying this is the most risks we
can tolerate and where you make

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X and this is the minimum amount
that we need you to make where

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you make you make nothing and so
the broker had that power.

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That's what the buy rate is for
it's to make, it's to make the

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negotiation and the whole
process a lot smoother.