Paying off an MCA early: is there a discount?

With a loan, paying early usually saves interest. With many MCAs, it does not. The purchased amount is fixed when you sign, so paying fast does not shrink it. That surprises merchants who have a good month and want to be done.

The short answer

Look for the early payoff or prepayment language in your agreement. Many MCAs have none, which means the full purchased amount is due however early you pay. Some contracts have a schedule that lowers the amount, and some leave it to the funder's discretion. There is no standard percentage, so don't count on any discount unless it is written in your contract or the funder agrees in writing.

The math

Take an advance paid back by fixed payments. Halfway through the term, you pay off the rest in one lump sum.

If there is no discount, you pay the same $135,000 in half the time. The cost doesn't change, but the time does, so what you pay per year of borrowed money goes up. The table compares full term with payoff on day 70, including what a discount on the remaining balance would be worth if your contract offered one.

Scenario	Time	Total paid	Cost of the advance	Same cash flows as a yearly rate
Pay on schedule, full term	140 business days	$135,000	$35,000	about 113%
Pay off on day 70: No discount	70 business days	$135,000	$35,000	about 148%
Pay off on day 70: 10% off what remains	70 business days	$128,250	$28,250	about 124%
Pay off on day 70: 20% off what remains	70 business days	$121,500	$21,500	about 99%

Illustration only. The discounts in the table are examples of what a discount would be worth, not typical or available terms; your contract may offer none. The yearly rate is the rate that equates the cash you received with the payments, scaled to 252 business days; it is not how a funder states cost. See Factor rate vs. APR.

What your contract may say

• Nothing. The purchased amount is due in full whenever you pay.
• A written schedule. A discount or a reduced fee if you pay by a certain date.
• A buyout at the funder's choice. Wording like "may, at its sole discretion, accept a lesser amount."

A few states now require funders to disclose prepayment terms before you sign. California requires a description of prepayment policies, and Missouri requires the offer to state whether prepayment carries costs or discounts and to point to the contract paragraph. If your funder is covered, that disclosure should say. See State disclosure laws for MCAs.

Before you pay it off

1. Reconcile first. If your debits ran above what the agreement allows, a credit can lower the balance before you pay. See How MCA reconciliation works.
2. Check you really need to. A payoff that drains the cash you need for payroll or taxes can send you back to another funder. Be careful with a "renewal" that pays off the old advance and adds a new one. See Stacking and renewals.
3. Get the number in writing. Not a phone quote.

How to ask

Send a short written request to the funder's notice address, and keep proof you sent it. Ask for:

• a payoff letter with the exact balance, the date it is good through and how to pay;
• whether any discount or fee reduction applies, and under which section of the agreement;
• a statement that payment of that amount satisfies the agreement in full;
• confirmation that debits will stop, and that the funder will file a UCC-3 termination (see UCC-1 liens).

Don't wire money until you have the letter. After you pay, check that debits have stopped and ask for a paid-in-full letter. Keep it with your records.

Sources

• Mayer Brown, Missouri commercial financing disclosure law (SB 1359), Sept. 12, 2024: disclosure of whether prepayment carries costs or discounts
• California DFPI, commercial financing disclosures overview (prepayment policy description)

We found no authoritative data on how large early payoff discounts are, so none are claimed here. Whether a funder agrees to one is up to the funder and your contract.

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