• Ken Peng

What are the fees and costs of an MCA?

Updated: 5 days ago


Merchant Cash Advances are not as simple as funding amount and payback amount, there are numerous fees and costs involved that may not necessarily be explained to you. What if we told you that often times, the working capital offer you receive is not presented to you at the best rate that you may qualify for? Or that low-rate offer you received on paper is going to end up costing much more than it appears? Despite a recent study stating that speed was more important than cost, we believe it's important that business owners do not take on costs beyond their means of repayment.


When a broker or sales representative takes your working capital request to a funding company, an offer is made. For example, let’s say you qualify for $10,000 with a payback amount of $13,000. Often times, these brokers and sales representatives will look to increase their commission earnings on your particular deal. The funding company providing the funds will allow for this through a process called “upselling.” So instead of being presented the original offer of $10,000 with a payback amount of $13,000, the broker or sales representative will present an offer of $10,000 with a payback amount of $15,000. As a result, they earn more commission and you are not receiving the best rate possible to help your business.


Another tactic to watch out for is an excessive fee structure. Many times, this is not presented to you until you’ve already accepted the funding offer. Some funders and brokers will charge various amounts for underwriting or origination, sometimes as much as $2,000 or $3,000. This is deducted from the funding amount you receive, while still having to pay the full payback amount. Using the previous example, your $10,000 offer suddenly becomes just $8,000 in your bank account while still having to pay back the full $13,000. This is how many funding companies are able to offer what initially appears to be a lower payback amount, only to end up costing you far more after taking out fees.


There are a variety of terms that are used to describe these kind of fees assessed on your funding amount. Whatever term is being used, the end result is you are going to receive much less than you were promised. No one should ever pay a company to be assessed for funding.


So how do you know if your Merchant Cash Advance offer is a good rate? The best way is to shop around, and to work directly with a reputable funder. Elevate Funding does not believe in excessive fees to receive funding or “upselling” practices, and do not allow for our partners to adjust offers to earn more commission. We believe in transparency. With each working capital offer, we provide an information sheet that outlines exactly what you’re paying, how much your sales representative is earning, and exactly what fees are being charged.

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