By Steve Conner, President, FinServe
How Misaligned ISOs and Referral Partners Are Derailing Lenders and Funders
Over the past few years, the business financing industry has seen a significant transformation. Lenders and funders who rely on referral partners—particularly ISOs (Independent Sales Organizations)—have learned a crucial lesson: if they’re not careful about who they partner with, it can lead to disastrous consequences. Working with the wrong referral partners can undo years of hard work.
The Impact of Outdated Practices in Business Financing
In our previous articles, we shared eye-opening statistics regarding ISOs and referral partners. For instance, businesses with monthly origination volumes ranging from $250k to $500k saw a shocking trend: more than 50% of their partners fell below the $250k threshold, while less than 2% of those partners were able to grow their business beyond the $500k mark. Even more concerning, in 2024 phone contact rates between referral partners and their leads have plummeted from as high as 8% to less than 2%—a staggering 400% loss in productivity.
The message is clear: those who have moved away from traditional methods like call centers and embraced automated funding processes are seeing growth. Meanwhile, those who haven’t adapted are struggling or even dying out.
A Partner’s Wake-Up Call: Moving from Call Centers to Technology-Based Models
This shift in the industry became clearer when one of my long-time partners, whom I’ve known since 2016, reached out to me in April 2024. He shared his frustrations about the dwindling effectiveness of his call center operations and the increasing difficulty of connecting with prospects over the phone. His business had once been a powerhouse, generating millions in monthly originations, but the blocking of calls by phone providers had caused significant disruption.
It was a turning point for him. Remembering the principles I’ve consistently advocated for over the years—such as inbound lead generation, automation, and automated funding operations—he knew it was time to shift his ISO model to something sustainable. So, we began transforming his outdated call-center-based ISO into a technology-driven operation. This shift wasn’t just about staying afloat—it was about thriving in an increasingly automated world.
The Modern Merchant’s Preference for Automation and Efficiency
It’s the forward-thinking ISOs and referral partners like these that lenders need to form strong relationships with. Why? Because their clients—merchants—are increasingly preferring automated funding processes. They want efficiency and transparency, not endless calls with multiple brokers trying to sell them the same deal.
Let me give you a glimpse into what this looks like for the modern merchant with this story about Gary:
Gary’s Experience: A Modern Merchant Navigating the Funding Maze
It’s 11:30 a.m. on a Monday, and Gary, a successful business owner, is already feeling the weight of the day. As usual, he’s juggling multiple tasks, but today’s frustration is different. His phone is constantly buzzing—texts and missed calls from eight different brokers, all eager to offer quick and easy funding solutions for his growing business. The problem? Gary doesn’t know who to trust.
Each broker promises him the best deal, but they all sound the same. He’s overwhelmed, frustrated, and exhausted by the constant outreach. He knows his business needs funding—there’s a cash flow gap that could cost him valuable opportunities—but how can he choose the right option in this sea of pitches? He’s already got enough to manage running his business; the last thing he wants is to waste his entire day fielding calls from brokers who don’t understand his urgency.
In sheer frustration, Gary silences his phone and decides to take a break. As he sits down for lunch, he pulls out his laptop and begins searching for a reputable funding company. Gary’s no novice—he’s a savvy business owner who knows that not all lenders are created equal. He’s been burned before, and he’s determined not to waste time on empty promises. He starts sifting through websites, looking for something more reliable.
After browsing for a while, he notices something that piques his interest: TrustPilot reviews. Gary’s skeptical of online reviews, but he knows TrustPilot’s system is more difficult to manipulate than others. He digs deeper, reading through detailed customer reviews. The feedback resonates with him—real business owners sharing genuine experiences about how a particular funding company had helped them grow. These weren’t generic, five-star reviews. These were specific, thoughtful comments from people who had worked with the company and found them to be reliable, transparent, and professional.
Gary feels a sense of relief as he realizes this could be the financial partner he’s been searching for. He’s not desperate for funding—he runs a strong, sustainable business—but he does need the right financial partner. He fills out the online application, ensuring all the details are accurate, but what really surprises him is how easy and straightforward the process is.
A Game-Changer: Real-Time Application Tracking
And the best part? He can track his application status directly through his merchant account. No more back-and-forth phone calls or sorting through hundreds of emails from brokers. He can log in, check real-time updates, and view exactly what’s next in the process. It’s efficient, organized, and a huge time-saver. Gary realizes how much time he’s been wasting with all those brokers for updates and how much more efficient this new approach is.
As he finishes his lunch, Gary leans back in his chair, taking a deep breath. For the first time today, he feels at ease. No more phone tag. No more endless calls and messages from brokers who all make the same promises. This experience feels like a “life hack” for his business—streamlined, efficient, and transparent. Gary now knows that he can find the right funding solution online, at his own pace, without the stress and frustration of the old way of doing business.
Gary’s New Approach: Efficiency and Transparency in Business Financing
He clicks “submit” on his application, uploads his funding stipulations, feeling a weight lift off his shoulders. As he moves on to the next item on his to-do list, Gary knows that for the first time, he’s found a funding partner who truly values his time and business as much as he does.
The Bottom Line: Adapt or Fall Behind
Gary’s experience is just one example of how business owners are increasingly choosing efficient, tech-driven solutions over outdated methods. For ISOs and referral partners, embracing technology and automation is no longer a choice—it’s a necessity. Those who adapt and align with the current trends will continue to thrive, while those who cling to outdated models will struggle to stay relevant.
As a lender, aligning yourself with these forward-thinking ISOs and partners is crucial to success in today’s rapidly evolving marketplace. Automated funding processes are the future, and businesses that attract and embrace the right ISO and referral partners will be the ones that lead the charge forward. The question is, will you adapt with them, or be left behind?