This guide explains common MCA contract terms in general. It is not legal advice, and it can't tell you what your own agreement means. For that, ask your funder in writing or have a business attorney review it.
What an MCA contract is
A merchant cash advance contract is an agreement to sell a share of your business's future receivables for a lump sum paid to you now. It is not a loan. That's why the contract talks about a purchase price, a purchased amount and a factor rate instead of a loan amount and an interest rate.
The document that controls your terms is the signed agreement, plus any addenda or schedules attached to it. An offer email, a text or a sales call can be a useful summary, but if it says something different from the signed agreement, the agreement wins. Read the signed version, not the summary.
The numbers that matter
Different funders use different labels for the same thing. This table lists the common names and what each number does for you.
| On your contract | Also called | What it means | Where you'll use it |
|---|---|---|---|
| Purchase price | Funded amount, advance amount | The amount the funder pays for your receivables | The tracker's "amount you received" |
| Purchased amount | Receivables purchased amount, total payback, RTR | The total you agree to deliver | The tracker's "total payback" |
| Factor rate | Factor | Purchased amount ÷ purchase price | Comparing offers |
| Specified percentage | Holdback, specified receivable percentage | The share of your sales the funder buys. The fixed payment is usually an estimate of it. | Asking for a reconciliation |
| Payment and frequency | Remittance, daily or weekly debit | The fixed amount taken, on business days or weekly | Your monthly budget and the tracker |
| Fees | Origination, underwriting, ACH or other fees | Taken out at funding or charged later | Working out your net funding |
| Funding date / first payment date | Effective date | When payments start | Estimating your balance and payoff date |
| Early payoff terms | Prepayment, early delivery discount | Whether paying early reduces what you owe | Deciding whether to pay off early |
The factor rate is the quickest way to compare two offers, but it isn't the whole cost. Fees and the length of the advance matter too. Our guide to how to calculate the cost of an MCA shows how to put them together.
Worked example
$50,000 × 1.30 = $65,000
Now say the contract lists a $1,500 fee taken at funding. That means $48,500 reaches your account, even though the purchase price is $50,000. You still deliver the full $65,000.
At $500 per business day, $65,000 takes 130 payments, or about 6 months of business days.
Example only, not an offer.
Check the math yourself
Two quick checks catch most surprises. First, divide the purchased amount by the purchase price. The answer should match the factor rate printed on the contract. Second, divide the purchased amount by the payment. That's how many payments the advance takes if nothing changes. Turn it into time: about 21 payments a month if the payment is daily on business days, or one a week if it's weekly.
If either answer doesn't line up with what you were told on the phone, ask before you sign, not after the first debit.
If the money that landed in your bank doesn't match the purchase price minus the listed fees, ask the funder for a closing statement that shows every deduction. One common reason is a renewal, where an old balance is paid off from the new advance before the rest is sent to you.
The clauses to read slowly
The numbers tell you the cost. The clauses tell you what happens when something changes. These are the ones worth reading word for word, with a list of questions beside you.
- Reconciliation or adjustment. Look for whether you can ask for a payment that matches your actual sales if they change, and what statements and notice the clause requires. See how to ask for a lower MCA payment.
- Stacking or additional financing. Look for whether taking another advance or loan needs the funder's consent. Our guide to how many MCAs is too many explains why it matters.
- Events of default. Look for the list of things the agreement treats as a default, and what the funder can do if one happens. Ask about anything on the list you don't understand.
- Personal guarantee. Look for whether you, as the owner, personally guarantee the business's performance under the agreement, and what that covers.
- Security interest and UCC filing. Look for whether the funder files a UCC-1 financing statement against business assets, and ask how it will be released once the advance is paid off.
- Confession of judgment. Look for whether the agreement includes one. Some states limit their use. Whether one applies to you is a question for a business attorney.
- ACH authorization and bank account terms. Look for which account is debited, and what the agreement says if you change banks or a payment is blocked. Our guide to an MCA funder debiting you twice covers why blocking a payment can be risky.
- Fees. Look for returned-payment fees, default fees and any other charges, and when they can be collected.
If any clause is unclear, ask the funder to explain it in writing before you sign, and keep the reply with your contract. Have counsel review anything you're unsure about.
Early payoff terms
Some agreements let you pay early but still require the full remaining purchased amount. Others give a written discount if you pay within set windows. The contract, or a written addendum, decides which one you have. Our guide to paying off an MCA early explains what to ask and what a payoff letter should show.
State disclosures you may receive
A growing number of states, including California and New York, require a written disclosure with covered commercial financing offers. Depending on the state, the disclosure can include figures such as the total amount you'll pay and an estimated annual rate. If you received one, keep it with your contract. It's a useful second view of the same deal.
California has also passed a new law that adds rules for some of these agreements from 2028. Our guide to California's AB 2116 explains what it changes for owners.
Questions to ask before you sign
- How much will actually reach my account, after every fee and any payoff?
- What is the total I'll deliver, and over about how many payments?
- Can I ask for a lower payment if my sales drop, and how?
- Does paying early reduce what I owe, and is that in writing?
- What counts as a default, and what fees apply if a payment is returned?
Get the answers by email, so they sit next to the contract.
How to get a copy of your contract
If you can't find your agreement, or you only have the offer summary, ask your funder in writing for a full copy of the signed agreement and every addendum, schedule and amendment. Keep them in one folder with your payment records, any reconciliation requests and any payoff letters. You'll want all of it if you renew, refinance, pay off early or ever need to dispute a payment.
Put the numbers to work
Once you've found the numbers, you can see where each advance stands without doing the math by hand. The free Bylt Capital tracker asks for exactly what's on your contract: the amount you received, the total payback, the payment, whether it's daily or weekly, and the funding date. From those it estimates your balance and payoff date, and adds every advance into one total. If your funder's statement shows a different balance, you can type that in and the tracker continues from there.
What to do next
- Find the five numbers on your contract: purchase price, purchased amount, factor rate, payment and frequency, and fees.
- Check the net funding against what actually reached your account.
- Read the clauses listed above and write down your questions for the funder.
- Get a full copy of every agreement you've signed.
- Add each advance to the free tracker using those numbers.
Founder and Chief Executive Officer, Bylt Capital
Daniel Morgan is the Founder and Chief Executive Officer of Bylt Capital, a direct provider of merchant cash advances, lines of credit, and equipment financing for small and mid-sized businesses. He began his career in merchant cash advance origination, where he advised business owners on funding options before taking on a team leadership role. He then moved into syndication, co-investing in advances alongside established funders, and built that into direct funding of smaller transactions. He later raised institutional capital to found Bylt Capital.
Having worked across origination, syndication, and underwriting, Daniel brings a full-cycle view of business funding. He leads Bylt Capital's mission to give business owners clear, transparent information about their financing before they commit.