Direct funder vs. a broker or marketplace

Four roles that can appear in one transaction

Direct provider or funder

A direct provider makes a specific funding offer and is responsible for providing or arranging the money under that agreement. Depending on the structure, the provider may be a lender, a financer, a receivables purchaser, a lessor or another commercial-financing company.

Broker or referral source

A broker or referral source may collect information, explain options, introduce your business to possible providers and present offers. Depending on the arrangement and the disclosure rules that apply, its compensation may come from the provider, from your business or from both.

Marketplace or matching platform

A marketplace generally matches your business with the criteria of participating providers, or lets you compare the providers who are interested. A match is not an approval. The SBA makes the same point about its own Lender Match service: it is a matching tool, not a loan application or a guarantee of an offer.

Servicer

A servicer handles payment processing, statements, account questions, changes to the agreement or collections. The provider and the servicer may be the same company or different ones. The agreement should say where payments go and whom to contact.

Role comparison

Question	Direct provider	Broker or marketplace
Makes the final offer?	Usually, subject to underwriting and final approval.	May present or explain an offer made by another provider.
Provides the money?	Yes, directly or through the provider's designated funding arrangement.	Usually not, just because it arranged the transaction.
Receives your application data?	Yes, for review, verification and servicing, as disclosed.	May collect your data and share it with possible providers under the consent and privacy terms that apply.
How is it paid?	May earn interest, financing charges, fees or the return on purchased receivables.	May receive a referral, origination or brokerage payment. Ask who pays it and whether it affects your proceeds or cost.
Collects your payments?	May service the funding itself or appoint a servicer.	Not necessarily. Confirm the company named in the agreement.
What to verify	The offer, disclosure, agreement, payment instructions and official contact details.	The broker agreement, privacy and consent terms, compensation disclosure and the identity of each provider that receives your data.

Ask where your application data goes

A business funding application can include owner identification, tax ID numbers, bank records and credit information. Before you submit one:

Read the privacy policy and the application consent.
Ask whether your information goes to one provider or to a network.
Ask which service providers handle identity, bank or credit verification.
Confirm whether a soft or hard credit inquiry may happen, and at what stage.
Send sensitive files only through the secure method the company designates.
Keep a copy of the consent and your documents as they appeared when you submitted them.

A wide network can give you more offers to compare, but it can also increase the number of companies that receive your information or contact you. Understand the consent before you submit, not after.

Understand compensation and net proceeds

Broker or referral compensation can be paid separately, financed, held back from your proceeds or paid by a provider. The rules differ. New York's commercial-financing regulation sets out provider responsibilities and addresses broker compensation in covered transactions. Read the final disclosure in the context of the full agreement.

Compare the amount your business actually receives with the total it must pay. A headline funding amount can overstate the money you can use when fees, commissions, prior balances or payments to third parties are held back.

Our guide to factor rates, APR and total cost shows how to compare net proceeds, scheduled repayment and timing.

Verification checklist

Write down the legal name, website, phone number and role of every company involved.
Confirm which company makes the specific offer.
Confirm which company sends the money and which company receives your payments.
Ask who pays any broker or referral compensation.
Match the payment instructions to the agreement. Verify any last-minute change on your own.
Review the privacy and communications consent, including how to opt out of marketing.
Don't sign a blank document, or one with terms that differ from the disclosure.

Where Fair Square fits

Fair Square Funding is a funding marketplace. It is not a bank or a lender. When you apply, your advisor matches your business with the lender criteria it fits, and their offers come back side by side for you to compare. The funding comes from the partner you choose, under that partner's written agreement.

That puts Fair Square in the marketplace role described above, so the questions in this guide apply to us too. Read our funding disclosures and privacy policy, and ask for the name and role of each party in your transaction.

Sources

This guide summarizes general roles and selected disclosure concepts. It does not classify every company or transaction.

General educational information, not financial, legal, tax or accounting advice. It does not describe guaranteed products or terms.