Origination Fee: Meaning in a Merchant Cash Advance
An origination fee is a charge for setting up the advance, sometimes called an underwriting or administrative fee. It's usually taken out of the money before it reaches you. That means you pay the factor rate on the full advance but receive less, so the real cost per dollar is higher than the factor suggests. Ask whether the fee is required and whether it can come down.
Where does it show up?
On the offer, in the contract's fee schedule, and on state disclosures as finance charges deducted at disbursement.
What does it look like in practice?
Advance $30,000 at 1.35. Origination fee $900. You receive $29,100 and pay back $40,500. Cost per dollar received: about $0.39, not $0.35.
Which owner question goes with this term?
What fees can come with an MCA? Answers to the questions owners ask about this term, with what to ask the funder.
How does it change an offer comparison?
Count the fee against the cash that reaches you, not the contract amount. A $1,000 fee on a $40,000 advance means $39,000 lands in your account, and every cost per dollar should use that number.
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.