How Commercial Loan Brokers Get Paid

Learn how commercial finance commissions work, including how commission structures vary by lender, loan product and individual transaction.

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How Commercial Loan Brokers Get Paid

Commercial finance is a commission-based business. Your income is directly tied to the size and type of transactions you arrange. Here's how the commission structure works.

Commission Structure

Commercial finance brokers earn commissions when transactions successfully close. Commission structures vary by lender, loan product and individual transaction. Transaction sizes can range from smaller financing requests to very large commercial transactions. Once a transaction closes and the commission is paid, the broker is not financially responsible if the borrower later defaults on the loan.

As an independent commercial finance broker, you decide how much business you pursue and how much time and effort you put into building your company. Your actual income will depend on the transactions you successfully fund and the commissions associated with those transactions.

Your business. Your clients. Your commissions.

The 60-30-10 Framework

After training, brokers often ask how they should divide their time among different types of transactions. The 60-30-10 Framework is a guideline GFTP teaches to help graduates balance their business-development efforts rather than focusing too heavily on any one type of transaction. It provides a way to regularly evaluate where you are spending your time and where you may need to refocus your efforts.

As a general framework:

60% of your time: One-Time Fee Transactions — Focus the majority of your business-development efforts on transactions that can generate a commission when successfully funded.
30% of your time: Residual Income Accounts — Dedicate a portion of your efforts to developing qualifying accounts that may provide ongoing monthly commissions while they remain active.
10% of your time: Large Transactions — Spend a smaller portion of your time pursuing larger, more complex transactions that typically take longer to close but may generate larger commissions.

Transactions based on one-time fees

We call these our “bread and butter” transactions because they represent a core part of a commercial finance broker’s business. These transactions can include a variety of loan products, with commissions based on the transaction type, size, and lender.

Commission Structures by Transaction Type:

Equipment Leasing: Commission structures may be up to 15% of the transaction

amount, depending on the lender and transaction.

SBA Loans: Commission structures may range from 1–3% of the loan amount,

depending on the lender and transaction.

Real Estate & Commercial Mortgages: Commission structures vary by lender and transaction.Broker commissions may be structured as points, depending on the lender and transaction.

These examples illustrate how commissions can vary based on the type and size of a successfully funded transaction. Your commission is paid when the deal closes, and because you work directly with your lenders, you keep 100% of the commission paid to you by the lender.

Actual commissions and income vary based on lender terms, transaction type and size, the number of successfully funded transactions, and individual business activity.

Residual Income Accounts

Residual income refers to ongoing commissions that may be earned while a qualifying client account remains active with a lender. Building a base of residual-income accounts can create an additional source of recurring revenue for your business. This can be accomplished through certain financing products or by developing relationships with vendors and other referral sources.

Accounts Receivable Financing and Factoring are important financing options for businesses, particularly newer businesses that may not yet qualify for traditional bank financing.

When a company sells a product or provides a service, it may invoice its customers and wait sixty to ninety days or more to get paid. This can create a cash-flow challenge for the business owner. Accounts receivable financing can provide access to funds based on outstanding invoices, with some funding sources advancing up to 85% of eligible invoices.

Example: On a $100,000 eligible invoice, a lender may advance $85,000 to the client. When the invoice is paid, the lender returns the remaining holdback, less applicable fees and charges.

As a broker, you may share in the revenue the lender earns on qualifying accounts. Some lenders pay brokers a percentage of their gross profits each month for as long as the client continues to finance with that lender. The amount and duration of these commissions vary by lender, account, and financing arrangement.

Example: Based on certain lender commission structures, a broker may receive an ongoing monthly commission while a qualifying client account remains active. The amount and duration of the commission vary based on lender terms, client volume, account activity, and other factors.

Vendor relationships can also become an important source of ongoing business. By developing relationships with vendors or equipment suppliers, you can create a referral network. When their customers need financing to purchase equipment, the vendor can refer those opportunities to you. You become a financing resource for the vendor while developing a potential source of repeat transactions for your business.

The number and frequency of transactions generated through vendor relationships will vary. Each successfully funded transaction may generate a commission based on the lender, financing product, and transaction terms.

Vendor relationships can create opportunities for additional transactions over time. Broker commissions on successfully funded transactions vary based on the lender, financing product and transaction terms. Actual results depend on referral activity, successfully funded transactions, lender terms and other factors.

Large or Mega Transactions

Large or mega transactions are more complicated and typically take longer to structure and close — but when they do close, they may generate larger commissions. We call these “home runs,” and just like in baseball, we all know how often a game is won solely on home runs. Very few! They’re great when they happen, but many factors can interfere with a successful outcome.

Excluding commercial real estate, which can exceed fifty million, we define this category as anything exceeding ten million in loan principal.

We will teach you how to structure these types of deals and provide you with the tools to pursue them — but we recommend not spending too much time in this area. Your bread-and-butter transactions and residual-income accounts can help provide greater balance between larger transactions.

You Define Your Success

Once you understand the different transaction types you can fund, you determine how much time and effort you put into building your business.

Take out a pad and paper. What is your income objective? What is your level of commitment to building a commercial finance business?

The 60-30-10 framework exists because balance is important when building a sustainable business. Developing opportunities across all three categories — one-time fees, residual accounts, and the occasional large deal — can help create a diversified pipeline.

Commercial finance commissions are based on the size and type of successfully funded transactions. Larger transactions may generate larger commissions, and closing more transactions creates additional commission opportunities. Actual income varies based on individual effort, successfully funded transactions, lender terms, market conditions, and other factors.

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