
Finder's Fee
A finder's fee (also known as "referral income" or "referral fee") is a commission paid to an intermediary or the facilitator of a transaction. A finder's fee or referral fee is a commission paid to the person or entity that facilitated a deal by linking up a potential customer with an opportunity. As another example, if a movie production company was in the market to acquire more cameras, lights, and other equipment, there might be a finder’s fee for the person or company that connected the company with a seller. For example, perhaps a rental car company needed more sedans to add to its fleet; a finder’s fee could be paid to the person who arranges the purchase of used sedans from a competitor or from a business that no longer needs those vehicles. A finder's fee is thus different from a service charge, which is a mandatory fee paid to a person or business in exchange for completing a service.

What Is a Finder's Fee?
A finder's fee (also known as "referral income" or "referral fee") is a commission paid to an intermediary or the facilitator of a transaction. The finder's fee is rewarded because the intermediary discovered the deal and brought it to the attention of interested parties. The presumption is that without the intermediary, the parties never would have found the deal, and the facilitator thus warrants compensation.
Depending on the circumstance in which the deal is established or completed, the finder's fee can be paid by either the transaction's buyer or seller.



Understanding a Finder's Fee
A finder's fee is a reward and thus a form of incentive to keep business contacts and resources communicating the needs of a company or organization to potential clientele or partners. While contracts are not required in such arrangements, structuring and agreeing to terms for finder’s fees can keep all parties in agreement on the scope of compensation that will be paid. This may be especially useful for contacts who repeatedly attract business to the company.
The terms of finder’s fees can vary greatly, with some citing 5% to 35% of the total value of the deal being used as a benchmark. It's a staple of Fundera's business model.
In many cases, the finder's fee may simply be a gift from one party to another, as no legal obligation to pay a commission exists. A finder's fee is thus different from a service charge, which is a mandatory fee paid to a person or business in exchange for completing a service.
A finder's fee is paid to an intermediary of a transaction, as an acknowledgment of the intermediary having sourced the deal and brought it to an interested party.
Examples of Finder’s Fees
Finder’s fees may be used to reward business contacts, who refer new clients or bring in new sales, to a company. For instance, if a contact arranges a meeting between the buyer and seller of a business, they might receive a finder’s fee for arranging the deal. This can also apply to businesses that seek and gain investors through referrals from others.
There can also be a finder's fee included in deals where a company buys select assets or materials from another company. For example, perhaps a rental car company needed more sedans to add to its fleet; a finder’s fee could be paid to the person who arranges the purchase of used sedans from a competitor or from a business that no longer needs those vehicles.
As another example, if a movie production company was in the market to acquire more cameras, lights, and other equipment, there might be a finder’s fee for the person or company that connected the company with a seller. Finder’s fees could also be offered for securing freelance professionals or contractors to complete a project.
Or consider the types of transactions that can occur with real estate. One individual could be looking to sell a property, but not have any buyers in mind until a friend discovers a potential buyer. If the transaction goes through, and the potential buyer ends up purchasing the property, the seller might give the friend a small percentage of the sale, as a reward for finding the purchaser. Similarly, real estate agents are allowed to give referral fees to other licensed professionals.
Related terms:
Benchmark
A benchmark is a standard against which the performance of a security, mutual fund or investment manager can be measured. read more
Block House
A block house is a brokerage firm that specializes in locating potential buyers and sellers of large-scale trades. read more
Clearing
Clearing is when an organization acts as an intermediary to reconcile orders between transacting parties. A clearing bank approves checks for payments. read more
Commission
A commission, in financial services, is the money charged by an investment advisor for giving advice and making transactions for a client. read more
Disintermediation
Disintermediation is the removal of a middleman in the supply chain to allow producers to sell directly to their customers. read more
Fiduciary
A fiduciary is a person or organization that acts on behalf of a person or persons and is legally bound to act solely in their best interests. read more
Investor
Any person who commits capital with the expectation of financial returns is an investor. A wide variety of investment vehicles exist including (but not limited to) stocks, bonds, commodities, mutual funds, exchange-traded funds, options, futures, foreign exchange, gold, silver, and real estate. read more
Negotiable
Negotiable refers to the price of a good or security that is not firmly established or whose ownership is easily transferable from one party to another. read more
Real Estate
Real estate refers broadly to the property, land, buildings, and air rights that are above land, and the underground rights below it. Learn more about real estate. read more
Service Charge
A service charge is a fee collected to pay for services related to the primary product or service being purchased. read more