# MCA buyout discount typical > When one funder buys out another funder's existing MCA balance, the typical discount is 5-15% off the remaining RTR (remaining-to-repay) — the buyout funder pays the original funder roughly 85-95 cents on each dollar of outstanding balance. The discount compensates the buyout funder for default risk on the assumed paper and for the operational hassle of taking over servicing mid-deal. MCA buyout discount typical refers to the pricing convention when a new funder pays off a merchant's existing MCA balance with another funder as part of a refinance, consolidation, or competitive-takeout transaction. The discount is the difference between what the new funder pays the old funder versus the full contractual remaining balance. **The mechanics — how a buyout transaction works.** Three parties are involved: the merchant, the original funder, and the buyout funder. The sequence: 1. **Merchant negotiates new advance with buyout funder.** Funder approves new advance amount. 2. **Buyout funder requests payoff letter from original funder.** Original funder issues a payoff statement showing remaining RTR balance as of a target date. 3. **Buyout funder negotiates discount.** Buyout funder offers to pay original funder a discounted amount (e.g., $85K on a $100K remaining balance) in exchange for full release. 4. **Original funder accepts (usually) and provides release.** Original funder receives the discounted payment, marks the deal as paid in full, and releases UCC filings and personal guarantee obligations. 5. **Buyout funder issues new advance.** Buyout funder funds the merchant for the new advance amount, with the buyout payment to original funder netted out of merchant proceeds. **The math — typical buyout discount.** Worked example: - Merchant owes original funder $100K remaining RTR (advance was $80K at 1.35 factor, $108K total repayment, $8K paid down so far). - Buyout funder offers new advance of $150K at 1.30 factor. - Buyout funder requests payoff at 90% of remaining RTR = $90K paid to original funder. - Original funder accepts $90K instead of waiting for full $100K collection over remaining 6-month term. - Buyout funder funds: $150K new advance × $90K paid to original = $60K net to merchant. - New repayment: $150K × 1.30 = $195K over new term. **The math — why original funder accepts the discount.** Original funder's calculation: - Hold to maturity: collect $100K over 6 months at ~1% monthly default loss = ~$94K expected net. - Take buyout: receive $90K cash today, redeploy into new origination earning ~15% annualized = $90K × 1.075 effective 6-month return = $96.7K equivalent. - Plus avoid default-risk volatility and free up capital for new origination. Original funder is generally indifferent between the two outcomes — the discount approximates the time-value of money plus default-risk premium. **The math — why buyout funder pays only 90%.** Buyout funder's calculation: - Pay $90K to acquire $100K of contractual RTR on existing deal. - $10K of immediate "discount profit" (the spread between what they paid and what they're entitled to collect). - Plus they're earning factor-rate economics on the new $150K advance. - Discount profit compensates for the operational complexity of running the buyout transaction. **The ranges — discount percentages by scenario.** Buyout discounts vary by: - **Standard refinance buyout** (merchant moving from B-tier to A-tier funder): 8-12% discount typical. - **Distressed-funder buyout** (original funder in operational distress, eager for capital): 15-25% discount possible. - **Competitive takeout** (buyout funder aggressively targeting original funder's customer): 5-10% discount typical (less pricing power because original funder is healthy). - **Modification / extension** (same-funder buyout into longer-term replacement deal): 0-5% discount (essentially no discount because the funder is just restructuring with itself). **The strategic insight — what merchants need to know.** Three points: 1. **Buyout discount is funder-to-funder; merchant doesn't see it directly.** Merchant gets net proceeds after buyout payment. The discount math determines whether the buyout funder can offer favorable economics, but it doesn't directly reduce merchant cost. 2. **Buyout deals usually carry higher new-deal factor rates.** Buyout funders price the new advance at 0.03-0.08 above their standard-deal pricing because the operational complexity of buyouts carries cost. 3. **Buyout consolidates UCC filings and PGs.** A meaningful side-benefit: the merchant's UCC filing from the original funder is released and replaced by the buyout funder's single filing. Cleaner credit profile. **The strategic insight — when buyout makes sense.** Three scenarios where buyout produces merchant value: 1. **Original deal pricing is materially worse than current market.** If the original deal is 1.42 factor and current market is 1.28, buyout-and-refinance captures significant savings even with the buyout funder's elevated new-deal pricing. 2. **Stacking consolidation.** Merchant has 2-3 stacked MCAs; single buyout consolidates them into one new deal with one daily debit. Operationally meaningful. 3. **Funder relationship problem.** Original funder has poor servicing, billing errors, or relationship dysfunction. Buyout exits the bad relationship. **The strategic insight — when buyout destroys value.** Three scenarios where buyout is the wrong move: 1. **Original deal was priced excellently.** If original factor is 1.20 and current market is 1.32, buyout pays new-deal factor on the consolidated balance — losing the original pricing advantage. 2. **Original deal is nearly paid off.** Buying out a deal with 2 months remaining and 80% paid down adds origination overhead with little structural benefit. 3. **Buyout funder is materially worse credit.** If the buyout funder has worse default-management or aggressive collections, the merchant trades known relationship risk for unknown risk. **The honest framing.** Buyout discounts of 8-12% are the 2026 market norm, and the discount benefits funder-to-funder economics, not directly merchant economics. Buyouts make sense when original pricing is meaningfully bad or when consolidation produces operational clarity; they destroy value when used on well-priced or nearly-complete deals. Merchants should evaluate buyouts based on net new-deal economics versus letting the original deal complete on schedule — not based on the headline "discount" the buyout funder receives. ## Related terms - [MCA buyout](https://fundnode.co/llms/glossary/mca-buyout) — When a new funder pays off your existing MCA and issues a single replacement advance — used to consolidate stacked positions or escape a predatory funder. Often costly net-net. - [MCA buyout vs renewal](https://fundnode.co/llms/glossary/mca-buyout-vs-renewal) — Buyout = new funder pays off existing MCA balance and replaces it with their own advance. Renewal = same funder issues a new advance, typically netting off the remaining balance. Buyout escapes a bad funder; renewal extends with the current one. - [MCA buyout calculator](https://fundnode.co/llms/glossary/mca-buyout-calculator) — A tool that computes the cost of consolidating one or more existing MCAs into a new larger advance — netting the gross payoff balances against the new funding amount to show the actual wire-to-merchant and the new daily debit. - [MCA portfolio buyout](https://fundnode.co/llms/glossary/mca-portfolio-buyout) — A transaction where one funder purchases the entire MCA portfolio (or selected deals) from another funder — typically at a discount to outstanding RTR (60-85% of book value depending on portfolio quality, default rate, and merchant retention probability). Used in funder exits, distressed-funder workouts, and strategic acquirer roll-ups. --- Source: https://fundnode.co/glossary/mca-buyout-discount-typical (HTML version) Document: MCA buyout discount typical — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.