Buyout: Meaning in a Merchant Cash Advance
A buyout is when a new funder pays off your existing merchant cash advance as part of a new deal, sending the payoff to the old funder at funding so you're left with one advance instead of two.
What does buyout mean?
A new funder offers you an advance. Part of it goes straight to your current funder to close out what you owe. The rest reaches your account as net new cash. The old funder's debits stop, and you carry only the new payment. It's how many owners move from one funder to another or combine positions.
Why does buyout matter to your business?
A buyout resets your positions and your payment. It can lower your daily load or free up cash. But you're paying a fresh cost on a new, larger purchased amount, and part of the new money only replaces the old balance. Compare the net new cash with the new payment and total to make sure the trade makes sense.
Is there an early payoff discount on a buyout?
If your old contract offers an early payoff discount, a buyout inside the window can use it. Ask the old funder for the discounted payoff figure.
What should the payoff letter show?
The new funder relies on a written payoff letter from the old one, with a good through date. Ask the old funder for it as soon as you decide, since delays in the letter are the most common reason buyouts take longer than expected. Once the payoff lands, confirm the old debits stop.
Where will you see it?
On the new offer, usually as a payoff line, and in the funding instructions. The old funder issues a payoff letter, and you should get a zero balance letter afterward.
Which terms are related to buyout?
The full list is in the glossary. Owners ask about this in Is an MCA renewal cheaper than the first 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.