Why Is My MCA Renewal Check Smaller Than the Approval Amount?
Because the renewal first pays off what you still owe on your current advance, and fees come out too. The approval is the total new advance, while the check you receive is the net new cash left after the payoff and any fees.
How does renewal math work?
Say a funder approves a renewal. From that amount, it subtracts the payoff balance on your existing advance, then any fees taken at funding. What's left is deposited in your account. If your old balance is large, the gap between the approval and the check is large too.
Why is the payoff the full balance?
When a funder pays off your old advance, it pays the remaining purchased amount, not what's left of the cash you originally received. The cost of the old advance is baked in. Unless your contract gives an early payoff discount, the old funder is owed the full remaining balance.
Which fees come out of a renewal?
Renewals carry fees just like first advances: underwriting, administrative or origination charges. Some funders reduce them for returning merchants. Ask for the fee schedule so you can see exactly what comes out.
How do you read the renewal offer?
- The approval, or new advance amount.
- The payoff going to the old funder.
- Fees taken at funding.
- The net new cash to your account.
- The new purchased amount and the new payment.
If the offer doesn't show all five, ask for them.
What if the net number is too small?
If the check is small compared with the new payment, you're mostly resetting the clock on your old balance and paying a fresh cost to do it. That makes sense when you need the payment structure to change or when even a modest amount of cash solves a real problem. It doesn't make sense as a habit.
How do you time the renewal better?
Waiting until more of the old advance is paid means less of the renewal goes to the payoff and more reaches you. It also usually earns better pricing.
How do you get clear numbers?
Ask the funder for a written breakdown before you sign. A good funder will provide it without hesitation.
What should you check before you sign?
Divide the net new cash by the new payment. That tells you roughly how many payments' worth of fresh money you're getting. If the answer is small, ask yourself whether a reconciliation on the current advance or simply finishing it would serve you better than a renewal right now.
How can Afterfirst help with this?
Send your renewal offer to info@afterfirstmca.com or call 877-FUND-654. We'll break down the payoff, fees and net new cash for you, and if the net number doesn't justify the new payment, we'll tell you.
What else do owners ask about this?
- Is an MCA renewal cheaper than the first advance?
- What do I need to renew my merchant cash advance?
- Can I consolidate business credit cards or loans along with my MCAs?
More short answers on this topic are on the renewals and consolidation FAQ, and the MCA renewal calculator 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.