Underwriting Fee: Meaning in a Merchant Cash Advance
An underwriting fee is a charge some funders take for reviewing and approving your merchant cash advance. It's usually subtracted from the money wired to you, so the cash that lands in your account is less than the advance amount printed on the offer.
What does underwriting fee mean?
When a funder approves an advance, it has spent time reading your statements, checking your identity and running searches on the business. Some funders recover that cost with a named fee. You don't write a check for it. The funder simply wires the advance amount minus the fee, and you still owe the full purchased amount on the other side.
Why does underwriting fee matter to your business?
It changes the real cost of the deal. An offer that looks cheaper on factor rate can come out more expensive once a large underwriting fee is subtracted. Always ask for the net funding amount, the dollars you'll actually receive, and compare offers on that. Some funders call the same charge an origination fee, a processing fee or an administrative fee. The label doesn't matter much. What matters is the total subtracted before the wire and the total you'll pay back.
Can you negotiate it?
Underwriting fees are sometimes negotiable, especially on a strong file or a renewal with a funder you've already paid well. It never hurts to ask whether the fee can be reduced or waived. The worst answer is no, and asking can save real money on a larger advance.
Where will you see it?
In the fee section of the contract, often in a small schedule near the funding amount. It also shows on the disclosure some states require for commercial financing.
Which terms are related to underwriting fee?
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.