Before you sign an MCA: 15 questions to ask

An MCA offer usually arrives with a short pitch and a long contract. The pitch tells you how fast the money comes. The contract tells you what you owe, when, and what happens if things go wrong. Fifteen questions can help you read it before you sign.

Why ask first

Once you sign, the terms are the terms. Most of the problems merchants describe later were written in the agreement from the start: a fee they did not notice, a clause that let the funder decide whether to lower the payment, or a default trigger they did not know existed.

You are allowed to ask questions and to take time. Ask for the full agreement and the fee schedule in writing, and read them before the deadline in the sales pitch. If an offer only works when you do not read it, that tells you something.

The 15 questions

For each question, write down the answer and the section number where you found it. If you cannot find it, ask the funder to show you in writing.

• What is the specified percentage?This is the share of your sales the funder is buying. It is the number reconciliation is built on. Look in the section that describes the purchase of receipts. If the contract only gives a fixed payment and no percentage, ask why.
• What is the purchased amount, and what do I really receive?The purchased amount is what you will deliver back. The funding amount is what the funder says it is giving you. Ask for the cash that will actually land in your account, after every fee. Look on the first page and in the fee schedule.
• Which fees come out of the funding?Origination, underwriting, administrative, wire and filing fees can all be taken before you see a dollar. Each one raises the real cost. Ask for them in a list with amounts.
• Is the payment daily or weekly?Daily debits hit your balance on many more days. Weekly debits are larger but fewer. Look for the payment schedule, and ask whether you can choose.
• What does the reconciliation clause say, and how do I ask?Look for "reconciliation", "adjustment" or "true-up". Note who must approve it, what documents are needed, how long the funder has to answer, and whether debits continue while it is pending.
• What does early payoff cost?Some agreements allow a discount for paying early, some allow nothing, and some are silent. Ask for the exact payoff terms in writing before you sign.
• What counts as an event of default?Missing a payment is the obvious one. Look also for changing bank accounts, taking another advance, selling the business, or letting a balance fall too low. A default can make the whole balance due.
• What kind of guaranty is there?A guaranty makes the owner personally responsible in some situations. Ask whether it covers only bad acts (such as hiding sales) or also covers non-payment. See Personal guaranty.
• Is there a confession of judgment?It lets a funder get a court judgment without a normal lawsuit. Rules differ by state. If you see one, have a lawyer licensed in your state read it before you sign.
• Is there a stacking clause?This clause limits taking other advances. Breaking it can be a default. Read it closely if you may need more funding later. See Stacking and renewals.
• Where would a dispute be heard, and is a jury waived?Look for words like "venue", "governing law", "jurisdiction" and "waiver of jury trial". A distant court or a waived jury can make a dispute harder and more costly.
• Did I get a state disclosure?Some states require a written disclosure of terms on commercial financing. Check whether you were handed one, and whether its numbers match the contract. See State commercial financing disclosure laws.
• Did a broker help, and who pays them?A broker may be paid by the funder, by you, or both. Their commission can be built into your price. Ask what the broker is earning on your deal.
• What are the renewal terms?Funders often invite renewals before the first advance is paid off. Ask how the old balance is handled, what fees apply again, and how much new cash you will really get.
• What happens if my sales fall?This is the core test. Ask how your payment changes, how fast, and who decides. Then ask what the funder does if you cannot make the payment at all.

What a quote can hide

Questions 2 and 3 are where numbers drift away from the pitch. Here is an example, with every figure worked out from the inputs. The fee, factor and term are assumptions for illustration only.

The pitch said $50,000. The cash that landed was $48,500. The amount to be delivered back was $67,500. The gap between those last two numbers is the real price of this example, and it is the number to compare with other offers. See Factor rate vs. APR for how to turn it into a yearly rate.

The payment also needs to fit your sales. A 12% specified percentage only matches a $562.50 daily payment if your sales are about $98,438 a month. If you sell less, reconciliation should lower the payment. That is why question 5 matters so much.

How to ask

• Ask in writing. A phone answer is hard to prove later. An email reply is a record.
• Ask for the whole package. That means the agreement, any schedules, the fee list and any state disclosure, not just a summary page.
• Compare more than one offer using cash received and total to be delivered back, not the headline number.
• Have a lawyer read it if the amount is large, or if you see a guaranty, a confession of judgment or an unusual default clause. A lawyer licensed in your state can tell you what the terms mean where you live.

This is a checklist for learning, not legal or financial advice. The contract's own wording controls. If a funder will not answer plain questions before signing, think about how it may handle questions after.

If you have already signed

Use the same fifteen questions on your own contract. Our guide on reading your MCA contract shows where each clause usually sits. If you find a reconciliation clause, you can ask for it in writing; see the request letter guide. Do not stop, block or reverse payments on your own. That can be a default. If you have a default notice, a lawsuit, a confession of judgment or a lien notice, talk to a lawyer licensed in your state.

Education only, not legal advice. Agreements differ; your contract's exact wording controls.