Renewal is the highest-margin product in MCA — lower CAC, lower default rate, and richer LTV. Renewal eligibility criteria are the gatekeepers.
Standard renewal eligibility criteria (2026).
- Paydown. 50–60% of original advance repaid.
- Recent payment history. 0 NSFs in last 30 days; <2 NSFs in last 60 days.
- No active modification. Deal not in workout or modified within last 60 days.
- Revenue check. Current month revenue at or above original underwriting baseline.
- Stacking check. No new MCA deposits since original funding.
- Compliance check. No litigation, bankruptcy filing, or default trigger.
- Bank account stable. Same bank account, healthy daily balance trend.
- Plaid feed live. Bank-data feed connected and current.
Why 50–60% paydown is standard.
- Stacking proxy. A merchant 50%+ paid down has demonstrated capacity.
- Risk model. Default risk halves once first half of advance is paid.
- Renewal economics. New advance net of payoff still produces meaningful net-new funding.
- Industry norm. Brokers and merchants expect this gate.
The renewal mechanics.
- New advance amount = previous outstanding + net-new advance amount.
- Net-new advance ranges 40–120% of original advance.
- Factor rate typically improves 0.02–0.05 vs. original.
- Term typically same or slightly extended.
- Daily payment typically increases proportionally.
Renewal pricing improvement examples.
- First deal. $100K at 1.32 factor, 9-month term, $580/day.
- Renewal at 60% paid. $40K outstanding + $120K net-new = $160K new advance at 1.28 factor, 10-month term, $820/day.
Why funders chase renewals.
- Lower CAC. No broker commission on renewal in some structures (or reduced commission).
- Lower default rate. Renewals default 25–40% less than first deals.
- Higher LTV. 35–50% of MCA volume comes from renewals at mature funders.
- Persistency drives valuation. Warehouse lenders price renewals more favorably.
Renewal commission structure.
- Standard renewal commission. 1.5–3% (vs. 6–12% on new origination).
- Broker-protected renewal. Original ISO gets full commission for 12–18 months.
- Hunting season. After protection window, any broker can claim renewal commission.
- Direct-to-merchant renewal. Funder bypasses broker entirely (controversial).
Common renewal disqualifiers.
- <50% paid down. Insufficient demonstration of capacity.
- Recent NSF spike. 3+ NSFs in 30 days signals deterioration.
- Active modification. Deal is in workout, not eligible.
- Revenue decline. 20%+ MoM revenue drop blocks renewal.
- New MCA detected. Stacked deals usually block renewal.
- New legal action. Lawsuit, bankruptcy, tax lien.
- Bank account changes. New bank or closed account.
- Industry restrictions. Merchant pivoted into restricted vertical.
Pre-emptive renewal outreach.
- At 40% paid. Soft outreach by relationship manager.
- At 50% paid. Renewal eligibility check, pre-approval.
- At 60% paid. Formal renewal offer with pricing.
- At 70%+ paid. Aggressive outreach competing with stacking offers.
Stacking vs. renewal dynamics.
- Stacking offers often come from competing funders at the 50–70% paid window.
- Funders use renewal pre-approval as defensive counter-move.
- Stacking offer plus renewal often results in payoff-and-replace transaction.
Renewal data velocity.
- Bank feed continuous. Daily monitoring of revenue and balance trend.
- NSF tracking real-time. Daily ACH return logs feed renewal scorecard.
- Stacking detection daily. Plaid Liabilities and FundKite checked daily for renewal candidates.
Common confusions.
First, "all renewals improve pricing." Partially — A-paper renewals improve; C-paper renewals often hold flat.
Second, "renewal is automatic at 50% paid." False — full re-underwriting required.
Third, "renewal commission is lower because it's easier." Partially — also because the relationship was paid for originally.
Fourth, "broker always gets renewal commission." False — depends on protection window and merchant initiation.
Fifth, "renewal is risk-free." False — renewals default 4–7% on average.
Recent trends (2024–2026).
- Renewal pre-approval automation at top-10 funders.
- GenAI-driven renewal outreach entering production at 2–3 funders.
- Stacking-aware renewal pricing adjusting for competitive pressure.
- Direct-to-merchant renewal portals at top-10 funders bypassing brokers.
- Renewal commission compression as funders push DTC strategy.
Related terms
- MCA funder portfolio monitoring systems — MCA funders monitor portfolios via loan-management systems (LMS), real-time bank-data feeds (Plaid/MX), payment-processor webhooks, and BI dashboards that surface daily aging, NSF spikes, and reconciliation requests.
- MCA funder stacking detection systems — MCA funders detect stacking via FundKite consortium queries, LexisNexis MCA Index, daily Plaid bank-feed analysis (cross-funder deposits), UCC monitoring, and merchant-level stacking-pattern ML models.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-funder-renewal-eligibility-criteria.