Buy Rate: Meaning in a Merchant Cash Advance
The buy rate is the factor rate a funder offers to a broker for a given file, before the broker's commission is added. It's an industry term you'll hear on the funding side, not a number that normally appears in your contract.
What does buy rate mean?
When a broker sends your file to a funder, the funder comes back with an approval at a certain buy rate. That's the funder's price for the deal. The rate you actually see on your offer, the sell rate, is the buy rate plus whatever commission the broker is paid. So the buy rate is the floor, and the difference between it and what you're offered is where the broker's pay comes from.
Why does buy rate matter to your business?
It explains why the same file gets different prices from different brokers. A broker chasing a large commission pushes the sell rate higher above the buy rate. At Afterfirst, the funder pays our commission when your deal funds, it's disclosed in your paperwork, and you never pay us anything on your own. If you're comparing offers, ask each broker how they're paid and what's disclosed. A straight answer is a good sign.
Do you ever see the buy rate?
Rarely. The buy rate is the price between the funder and the broker, and the offer you see shows the sell rate. What you can ask for is the total payback, the fees and the broker's commission in dollars, which tells you the same story.
Where will you see it?
Mostly in conversations between brokers and funders. You won't normally see the buy rate on an offer, but you'll see its effect in the factor rate you're quoted.
What's a quick way to think about it?
Every price you're quoted in this industry has a wholesale layer and a retail layer. The buy rate is the wholesale layer. You rarely need to know the exact number, but knowing it exists explains why shopping with a broker who's upfront about pay makes sense.
Which terms are related to buy rate?
The full list is in the glossary. Owners ask about this in Is an MCA factor rate monthly or for the whole advance?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.