Why your MCA deal yield looks higher on the report than it does on the books

A merchant cash advance funder we work with ran an ISO (broker who sources deals) performance report every month to rank brokers by deal yield. For eight months, one ISO source appeared at the top of the list. The deals were clean, the factor rate averaged 1.38, and the default rate on that source was low. On the deal report, the net income per funded deal from that broker was approximately $10,800.

When we traced the actual costs back to each deal, the number came down to $10,375. Not a disaster in isolation. But enough to move that ISO from first to third in the ranking. The source that looked best for eight months was third when the books counted correctly.

The missing costs were not hidden. Every one of them was in QuickBooks. They were in overhead instead of on the deal record.

What origination costs are

Origination costs are costs incurred because a specific deal was funded. They would not exist if that deal had not closed. When they are recorded as general overhead rather than deal-level expenses, the income reported on each deal is higher than the actual yield.

The most common origination costs that land in the wrong place:

UCC filing fees. Every funded deal typically requires a UCC-1 filing, a public record of the funder’s interest in the merchant’s receivables, in the merchant’s home state. Fees vary by state, but $150 per filing is common in higher-cost states like New York. Most funders record these as miscellaneous office fees, where they disappear into overhead.

Bank verification and data pull charges. Before a deal funds, underwriters pull bank statements through a third-party verification service and run a daily balance analysis. Those services bill per transaction. A typical cost is $40 per deal. These commonly land in subscriptions or technology fees, pooled with software costs that have nothing to do with any specific deal.

Underwriting platform fees. Funders using decision-support or credit-scoring platforms often pay a per-submission or per-funded-deal fee. A common rate is $150 to $200 per deal. These are frequently recorded in professional services or software, in overhead.

Background and fraud screening. Credit bureau pulls, identity verification, and fraud database checks add $40 to $75 per deal. They typically land in a compliance or due diligence line in overhead, pooled with expenses that apply to the whole portfolio.

What one deal actually yielded

Here is the funded deal described above, with each origination cost assigned to it:

The difference on a single deal is $425. Across 200 funded deals per year, that is $85,000 sitting in overhead instead of reducing deal-level margins. The portfolio-level yield figure is $85,000 higher than it should be.

Why this matters for reporting and decisions

ISO ranking reports are based on the wrong number. Different ISO sources carry different origination cost profiles. A broker with a lower first-touch conversion rate drives more bank verification pulls and underwriting submissions per funded deal than one with a higher conversion rate. When origination costs are pooled in overhead, the ranking report reflects gross income only. The broker with the highest origination costs per deal looks identical to the one with the lowest.

Underwriting decisions lack a cost benchmark. If an enhanced underwriting review costs an additional $130 per deal but prevents two defaults per quarter on a $28,000 average deal size, the additional scrutiny returns more than it costs. That analysis requires knowing the per-deal origination cost. When those costs are in overhead, the comparison is not possible.

Yield figures reported to capital partners are overstated. Funders who share deal-level yield with investors or capital sources often calculate it as factor income divided by capital deployed. If origination costs are in overhead, the yield figure is higher than the net return. On a $5 million deployment at $425 of origination costs per deal, that gap adds up to several hundred thousand dollars of overstatement.

What proper origination cost tracking looks like

For MCA funders we work with, every funded deal has a class or job code in QuickBooks assigned at the time of funding. Every origination cost is coded to that class when the invoice is paid.

UCC filing receipts are entered the day the filing is processed. Bank verification fees are matched to the deal they belong to when the monthly itemized bill arrives from the service provider. Underwriting platform fees are allocated deal-by-deal using the provider’s transaction log. Background check invoices are coded to the specific deal at payment.

The deal-level Profit and Loss report (P&L) shows gross factor income, direct origination costs, and net yield on one report. ISO ranking runs from net yield. The overhead P&L covers only the costs that apply to the portfolio as a whole.

Best practices for MCA funders

• Build a standard list of origination cost types and the QuickBooks class or job code each is assigned to at funding. Include the list in the bookkeeping workflow so every invoice is coded correctly from the start.
• Reconcile UCC filing fees monthly against funded deal count. A mismatch indicates deals are closing without a tracked filing cost, or fees are being recorded in the wrong account.
• Request itemized billing from bank verification and underwriting service providers. If a vendor bills only a flat monthly total, calculate a per-deal rate from the monthly funded count and allocate it by deal in the books.
• Run the ISO ranking report from net deal yield, not gross factor income, before making decisions about broker relationships, pricing, or deal volume targets.
• Review the deal-level P&L against the general overhead P&L each quarter to confirm that origination costs have not migrated back into overhead due to misfiled invoices.

Three questions worth asking

1. What is the average origination cost per funded deal over the last 90 days, and is that number tracked at the deal level or estimated from overhead totals?
2. Are UCC filing fees, bank verification charges, and underwriting platform fees coded to specific deals or pooled in overhead accounts?
3. Does your ISO ranking report reflect net deal yield after origination costs, or gross factor income before them?

If those answers are uncertain, the deal-level reports are showing higher yields than the books support. The fix is a consistent classification change applied at funding, for each cost type as it is incurred.

If you want to see where your origination costs are currently landing, send a recent month of funded deals with the matching expense detail. We will map where each cost type is going and what the deal-level yields look like once the books are correct.