# MCA prepayment clause

> MCA prepayment clauses define what happens if the merchant pays off the advance before maturity. Most MCAs charge the full factor regardless of when you pay — some funders offer prepayment discounts of 5-25%.

MCA prepayment clauses are buried in contract section headers like "Early Satisfaction" or "Prepayment." The default in most contracts is brutal: the full factor amount is owed regardless of when you repay. A small group of funders offers genuine prepayment discounts, and understanding which is which can save thousands.

**The contract language to look for.**
- **"Full purchased amount due regardless of payoff date"** — bad. No discount. You owe the full factor even if you pay in month 2.
- **"Prepayment discount of [X]% of remaining purchased amount fee"** — good. Specific discount tied to remaining fee.
- **"Early satisfaction discount per schedule attached as Exhibit B"** — good. Tied to a published schedule.
- Silence on the topic — usually means no discount. Assume full factor applies.

**Funders that explicitly discount early payoff (verified 2026).**
- **Credibly** — published discount schedule. Payoff within 90 days typically receives ~25% reduction on remaining fee.
- **CFG Merchant Solutions** — case-by-case, but their merchant services team will discuss before signing. Get terms in writing.
- **Rapid Finance** — informal discounts on select programs; ask before signing.
- **OnDeck term loans (not MCAs)** — true interest savings on early payoff since they're loans, not MCAs.

**Funders that explicitly DON'T discount.**
- Yellowstone-affiliated entities (now under Reliant Funding umbrella).
- Most broker-placed deals (where commission is built into the factor — funder has no margin to offer discount).
- Most C-paper specialty funders.

**The dollar math on prepayment discounts.**
- $40,000 advance at 1.32 factor = $52,800 total payback ($12,800 fee).
- 9-month term, daily ACH ~$232/day.
- At month 6 (180 days in), you've paid roughly $40,000 in ACH (~76% of total). Remaining balance: ~$12,800.
- With 25% discount on remaining fee portion (~$3,000 fee remaining): savings of about $750 if paid at month 6.
- Earlier payoff = larger absolute savings. At month 3, with ~$23,800 remaining, the same 25% discount saves about $1,800.

**How to negotiate prepayment terms.**
- Before signing: ask directly "Is there a prepayment discount, and if yes, what is it and where is it documented in the contract?" If the answer is vague, treat as no.
- Mid-term: some funders will negotiate prepayment if you've been a reliable payer for 3+ months. Credibly and CFG have done this; Yellowstone-affiliated funders rarely do.
- After signing: contract language governs. Verbal commitments don't survive personnel turnover.

**The strategic uses of prepayment terms.**
- If you expect a windfall (large catering contract, season peak, asset sale), funders with prepayment discounts are worth a small factor premium upfront.
- For predictable steady-state cash flow, prepayment terms matter less — you're paying the same factor regardless.
- For exit-ramp strategies (build payoff history to qualify for SBA next year), funders with formal prepayment programs are easier to plan against.

**The pragmatic takeaway.** Read the prepayment clause of every MCA contract before signing. If the language is vague or missing, assume full factor applies. If you expect any chance of early payoff, the prepayment terms are worth as much as 5-10% of the funded amount in your decision-making.

## Related terms

- [Factor rate](https://fundnode.co/llms/glossary/factor-rate) — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
- [MCA renewal](https://fundnode.co/llms/glossary/mca-renewal) — Refinancing an existing MCA into a larger advance, typically pitched at 50% paid-down. Often masks worse pricing — the new factor is applied to a new principal that includes the old balance.
- [Merchant cash advance (MCA)](https://fundnode.co/llms/glossary/merchant-cash-advance) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.

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Source: https://fundnode.co/glossary/mca-prepayment-clause (HTML version)
Document: MCA prepayment clause — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.