MCA fees, line by line

The factor rate is only one price tag. Fees can be taken from your funding, added to your payback, or charged later if something goes wrong. Added up, they can change what the deal really costs.

Why fees matter

A factor rate looks like the whole price. If a fee is taken out of your funding, you still deliver back the full purchased amount, but you received less cash. The same payback on less cash is a higher cost. That is why comparing offers on the headline number alone can mislead you.

The fees, one by one

Names and amounts vary by funder. Look for these in the fee schedule or the funding section of the agreement, and ask about anything you do not recognize.

• Origination fee. Usually a percentage of the funding, often taken out of the amount you receive. It pays for setting up the deal.
• Underwriting or processing fee. A flat charge for reviewing your file. It can come out of funding or be billed separately.
• ACH, administrative or servicing fee. A charge for the debit system or for managing the account, sometimes per payment.
• Wire fee. A charge for sending the money to you by wire.
• UCC filing fee. The cost of filing the lien notice described in UCC-1 liens. There may be a second charge to terminate it later.
• NSF or returned-debit fee. Charged by the funder when a debit fails, on top of any bank fee.
• Default fee or late fee. Charged when the agreement says you are in default. Check the amount and when it applies.
• Stacking or breach fee. Charged if you take another advance in breach of the stacking clause.
• Renewal fee. A new origination fee when you renew before the old balance is paid, often on the whole new amount.

Funding vs. cash that lands

Here is an example with five fees. The fee types and amounts are assumptions for illustration, not typical charges. Every figure is worked out from the inputs.

The offer said $50,000. $47,800 landed. You still deliver back $67,500. Without fees the cost of the money is $17,500. With fees, it is $19,700.

What fees do to the rate

If you treat the deal like a loan, with 120 equal daily payments of $562.50, you can estimate a yearly rate two ways: using the advertised funding, and using the cash that actually lands.

The rate that counts is the one based on the cash you received. These are estimates, and the funder's own disclosures may be different. For how the math works, see Factor rate vs. APR.

Fees and renewals

Renewals deserve their own look. Suppose a funder offers a new advance before the first is fully paid. The new fees can apply to the whole new amount, even though part of that amount simply pays off the old balance. The cash you receive is the new amount minus the old balance minus the new fees, which can be much smaller than the headline. Ask for a renewal worksheet that shows the old balance, each fee and the net cash, before you agree. See Stacking and renewals.

When fees are charged

Fees come at different moments, and each moment has its own question.

• Before funding. Fees taken out of the amount you receive. Ask for a funding statement.
• During repayment. Per-payment servicing charges, returned-debit fees and reconciliation or modification fees. Ask whether asking for a reconciliation costs anything.
• At the end. Lien termination, payoff or early payoff charges. Ask who files the termination and when.
• On default. Penalties, legal costs and collection charges. Read the default section for amounts and what the agreement says triggers them.

A fee that is added to the payback, rather than taken from the funding, raises the cost without changing the cash you receive. Ask whether any fee increases the purchased amount.

Comparing two offers

When you hold two offers, build the same small table for each: cash that lands, total to deliver back, payment size, number of payments and every fee, whether it comes out of funding or is added later. The difference between cash that lands and total to deliver back is the cost in dollars. Divide that cost by the cash that lands to get a quick percentage you can compare. For example, in the numbers above the cost with fees is $19,700 on $47,800 of cash, or 41.2%, while the headline suggests $17,500 on $50,000, or 35.0%. That simple comparison is not an APR, but it makes fees visible.

How to find them

1. Ask for a funding statement that shows every deduction from the amount you receive.
2. Read the fee schedule, and search the agreement for "fee", "charge", "cost" and "expense".
3. Compare the funding on the first page with the deposit in your bank. If they differ, find the difference.
4. Ask what fees apply if a debit fails, if you renew, or if you pay early. See Paying off an MCA early.
5. If a state disclosure was required, check that its fee numbers match the contract.

If you think a fee was charged that the contract does not allow, ask the funder in writing to explain it. Do not stop, block or reverse payments on your own. For a default notice, a lawsuit, a confession of judgment or a lien notice, talk to a lawyer licensed in your state.

Education only, not financial or legal advice. Fee names, amounts and the estimated APRs here are examples.

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