Can I Sell My Business While I Have an MCA?
Yes, but the advance usually has to be paid off or assumed by the buyer as part of the sale. Most MCA contracts treat a sale or change of control without the funder's consent as a default, so talk to the funder early.
Why does the funder care about a sale?
The funder bought a share of your business's future sales. If the business changes hands, those sales now belong to someone the funder never underwrote. That's why contracts include change of control or sale clauses. They let the funder protect itself by getting paid off or approving the new owner.
What are the usual paths to a sale?
- Pay off the advance at closing. The funder gives you a payoff letter, the escrow or closing agent pays it and the funder files a UCC termination.
- Have the buyer assume it. Some funders agree if the buyer is creditworthy and signs a new guarantee. This is less common.
- Refinance before the sale, if the timing doesn't work for either.
Will buyers find the advance?
A buyer's due diligence includes a UCC search and a review of the business's debts. The advance and its lien will show up. Disclosing it early keeps the deal on track. Hiding it risks the sale and the buyer's trust.
Is there an early payoff discount?
If your contract offers an early payoff discount, a sale is a great time to use it. Ask the funder for a payoff letter showing the discounted amount. It can make a real difference in what you take home from the sale.
Is this legal advice?
This is general information, not legal advice. Your contract's specific language controls, and a business sale involves many moving parts. Your attorney and your broker for the sale should both know about the advance.
How do you time the payoff with the closing?
Request the payoff letter a week or two before closing, and ask for a good through date that covers the closing day. The escrow or closing agent pays the funder from the sale proceeds and sends you the confirmation. Make sure the funder files the UCC termination afterward, since the buyer's bank or attorney will want to see it cleared.
What if the sale price won't cover the balance?
If the sale won't bring in enough to pay the advance in full, talk to the funder before you sign with the buyer. A negotiated payoff is sometimes possible, but it needs the funder's written agreement. Closing the sale without it can put the personal guarantee in play.
Why tell the funder early?
Call the funder as soon as a sale looks real, well before the closing date. Ask for a written payoff figure good through the expected closing, and ask whether any early payoff discount applies. A funder that hears about the sale from a lien search or the buyer's lawyer is less flexible than one that heard it from you first.
Can the buyer take over the advance?
Some buyers prefer to take over an existing advance instead of paying it off at closing. That needs the funder's written consent, a new signer on the guaranty and usually a review of the buyer's own bank statements. Expect the funder to treat it much like a new file.
How can Afterfirst help with this?
If you're planning a sale, call 877-FUND-654. We'll help you read the change of control section, request a payoff letter and time the payoff so it closes cleanly with the sale.
What else do owners ask about this?
- What happens when I finish paying off my MCA?
- What happens to my MCA if I close my business?
- Can a funder change my MCA terms after I sign?
More short answers on this topic are on the offers and contracts FAQ, and the MCA offer comparison runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. 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.