(SHARED) BROKER FEES
Warning. This can be a sensitive subject… or not.
Bottom line, those involved with putting deals together and bringing together of people to consummate deals should rightfully be compensated.
How much compensation is considered acceptable overall and distributed between the intermediaries is debatable and the topic of today’s post.
Depending on industry, commodity, product or service you are trading it will vary.
As I’m in the sourcing capital business, this is where more emphasis will be on.
Below are some universal understandings of how fees are paid to brokers in the U.S.
- fees can be paid by both sides
- there can be representing brokers on each side
- typically if there is more than one intermediary on either side, only one representing broker will be recognized as the broker on record for either side
- if funding source charges origination fees, funder could payout a portion of origination fees or broker fees must be in addition to.
- typically funding sources will not allow for broker fees to be higher than origination fees
- some funding sources can and willing to recognize broker fee arrangements and are listed on term sheets, closing docs and paid out at closing from proceeds. Others will require brokers to have their own separate fee agreement in place to collect on themselves vs being paid out at closing from funding proceeds.
How fees are earned by brokers in the U.S.
- Referral / connector
- Structuring the deal
- Negotiating terms and conditions
- Short and/or long term solutions
- Providing education and consultation on industry, market and products.
Now the fun / sensitive part… or not
I personally believe shared compensation should be based on value provided.
10-15% of earned fees, if simply referring / connecting 2 parties
20-25% of earned fees, if including gathering of required supporting info and docs
25-40% of earned fees, if providing any influential relationship along with gathering of supporting info and docs.
30-50% of earned fees, if assisting with the deal structure, negotiations, education and consulting in addition to the above.
This is very subjective and there’s no standard but this is something I personally think is reasonable and fair.
What do you think and/or currently do?
Let’s talk about thoughts on total fees… on another post another day another time.
#brokers #commissions #businessfunding
