Paydown: Meaning in a Merchant Cash Advance
Paydown is how much of a merchant cash advance's purchased amount you've already delivered, often expressed as a share of the total. Funders use paydown to decide renewal eligibility and to price new offers.
What does paydown mean?
If your purchased amount was a certain total and you've paid half of it, your paydown is half. Funders track this closely. It tells them how far along you are, how much risk remains on the advance and how much of a renewal would go to paying off the old balance.
Why does paydown matter to your business?
Paydown is the number that decides whether a renewal gives you meaningful new money. At low paydown, most of a renewal pays off what you owe. At high paydown, more of it reaches you as net new cash. Tracking your own paydown helps you judge renewal offers and time them well.
How do you track your paydown?
Take the purchased amount, subtract every payment collected and compare what's left with the original. Ask the funder for its ledger to confirm.
How does paydown affect cash flow?
High paydown also means your current payment is closer to disappearing. Before you renew at that point, think about what the business would do with the freed up cash flow. Sometimes finishing the advance and running without a payment for a while is the better choice than resetting it.
How does paydown work on a split?
With a split, paydown grows faster in strong months and slower in weak ones. Check it now and then with your processor's reports so you know where you stand.
Where will you see it?
In renewal conversations, payment ledgers from your funder and our renewal calculator.
Which terms are related to paydown?
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.