Two Contracts Often Talked About as One
Ask an ISO how brokers get paid and the two structures often blur together in conversation, even though the paperwork behind them is genuinely different. A direct broker agreement is between a broker and a funder. A sub-broker agreement is between two brokers, one of whom is recruiting the other into their own pipeline. Confusing the two matters more than it sounds, because the compensation trigger, the funder relationship, and who is accountable for a bad submission are different in each.
Our companion guide on building an ISO sub-broker network covers the recruiting and pay side of this relationship directly. This piece is scoped to the contract mechanics themselves, what differs on paper between the two agreement types.
What a Direct Broker Agreement Sets Up
In a direct broker agreement, an ISO is defined, per MCA Rocket’s own glossary, as an established broker with formal funder relationships, submitting merchants directly to that funder’s underwriting. Compensation runs on the buy rate mechanic: the funder offers a factor rate before any broker markup, and the broker’s earnings, points or commission, are quoted per percentage point of funded amount above that buy rate.
The broker in this structure answers to the funder directly. Submission quality, stips, and the pace of deal flow are all part of a relationship the broker is building and maintaining with that specific funder, one submission at a time.
What a Sub-Broker Agreement Sets Up
A sub-broker agreement runs on a different mechanic entirely. When an ISO recruits a sub-broker rather than hiring a closer directly, the parent broker earns a revenue share of the sub-broker’s own closed deals, not a W-2 or 1099 wage, according to MCA Leads Pro’s own breakdown of the structure. The sub-broker is not being hired as an employee or a contractor paid for hours or activity, they are being brought in as a smaller broker operating underneath a bigger one’s pipeline and, usually, its existing funder panel.
That distinction is the whole reason this is called a sub-broker agreement and not a hiring agreement. The parent broker is not managing an employee’s time. They are sharing revenue on deals a separate, independently operating broker closes.
Where the Contract Language Diverges
Three things genuinely differ on paper between the two structures. First, the funder relationship: a direct broker agreement puts the broker in a formal relationship with the funder itself, while a sub-broker typically has no such direct relationship and works through the parent’s existing panel instead. Second, the compensation trigger: a direct agreement pays on the buy-rate spread the broker earns from the funder, while a sub-broker agreement pays the parent a revenue share of the sub-broker’s own closed volume. Third, accountability: a funder underwriting a direct broker’s submission is evaluating that broker specifically, while a sub-broker’s work is, from the funder’s side, invisible, it shows up as the parent broker’s own submission.
That last point is worth sitting with. A sub-broker’s bad habits become the parent broker’s reputation risk with the funder, since the funder never sees the sub-broker as a separate party to the relationship at all.
Why This Distinction Matters Before You Recruit
Getting this backward at the recruiting stage creates real confusion later. A recruit who expects a direct funder relationship and a formal employment structure is going to be surprised by a revenue-share arrangement with no funder access of their own. Being explicit about which structure is on the table, before an agreement is signed, avoids a mismatch that shows up as friction months into the relationship instead of on day one.
Our companion guide on building a sub-broker network goes further into the recruiting and pay-structure side of this decision once the contract type itself is settled.
Neither Structure Changes How a Meeting Gets Booked
Whether an ISO is running direct broker agreements with its funders or building out a sub-broker network underneath its own panel, the thing every one of those brokers still needs is a merchant on the phone in the first place. The contract structure decides how a closed deal gets paid. It does not decide how a deal gets found.
Human + AI SDRs book that first conversation the same way regardless of which agreement structure a shop is running underneath it, a double-confirmed meeting lands on the calendar either way.
Sources
The external data in this article draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.