# MCA prepayment credit > A discount applied to the outstanding RTR balance when a merchant pays off an MCA early — typically 5-20% of the remaining balance, almost always available only on request and rarely disclosed in the original FRSA. MCA prepayment credit (sometimes called a "discount" or "early payoff concession") is the single biggest piece of leverage a profitable merchant has on an active MCA — and the one most merchants never use because the funder doesn't volunteer it. Understanding how the credit is calculated, when it's offered, and how to negotiate it can save five-figure sums on a single payoff. **The mechanics — what's actually being discounted.** An MCA is sold as the purchase of future receivables for a fixed Right-to-Repay (RTR) amount. On paper the RTR is non-discountable: $100K advance × 1.32 factor = $132K owed, full stop. In practice, when a merchant pays off the remaining RTR balance early (say, $80K remaining of the $132K), funders routinely offer a credit against that balance because: 1. **Time value of money.** $80K today is worth more to the funder than $80K spread across 6 more months. 2. **Re-deployment economics.** Funders earn factor on deployed capital; capital sitting in a paying-down book isn't earning new factor. Re-deploying into a new $80K advance at 1.30 generates $24K of new gross profit — far more than collecting the last $80K linearly. 3. **Default risk avoidance.** Every additional day a deal is outstanding is risk-weighted. Closing the book early eliminates that tail risk. 4. **Renewal capture.** A merchant offered a prepayment discount on the current deal is dramatically more likely to take a renewal advance — which is the funder's most profitable deal type. **The math — what discount levels look like.** Typical 2026 discount tiers, on a $80K remaining RTR balance: - **0-30% paid in (early in deal life).** Discount: 15-20% of remaining. Payoff: $64-68K. - **30-60% paid in (mid-deal).** Discount: 10-15% of remaining. Payoff: $68-72K. - **60-90% paid in (late deal).** Discount: 5-10% of remaining. Payoff: $72-76K. - **>90% paid in (almost done).** Discount: 0-5%. Payoff: $76-80K. The pattern reflects opportunity cost: the more capital the funder has already recovered, the less they benefit from accelerating the tail. **The hidden default — discount is rarely automatic.** Three operational realities make this credit easy to miss: 1. **The FRSA doesn't promise it.** Most contracts contain language like "no discount for early payoff" or are silent. Merchants reading the contract assume there is no credit available. 2. **Customer service won't volunteer it.** Frontline reps quote the gross remaining RTR when asked for a payoff. The discount is a discretionary concession from underwriting or portfolio management — not a standard quote. 3. **Brokers may not know.** Even the originating ISO often doesn't know the funder's prepayment-discount practice; they relay the gross payoff figure to the merchant and miss the savings. **The strategic insight — how to negotiate the credit.** Five-step playbook: 1. **Ask for the gross payoff figure in writing first.** Email customer service requesting "total balance to satisfy the contract today" — get a number you can quote. 2. **State a payoff intention with a specific date.** "I plan to pay off in full by [date 7-14 days out]." Concrete dates trigger portfolio management review. 3. **Ask the magic question.** "What is the discounted payoff if I wire the full balance by [date]?" Note: not "is there a discount" (yes/no question that gets a no), but "what is the discount" (forces a number). 4. **Mention competing offers.** "I have a renewal offer from another funder at [terms]; what can you do to keep my business?" Renewal-loss avoidance is the strongest internal trigger for discount approval. 5. **Get the discounted payoff in writing.** Demand a payoff letter on funder letterhead with the discounted figure and a 7-day validity window. Wire against that letter, not against a verbal quote. **The strategic insight — when the discount is largest.** Prepayment credit peaks when the funder has the most incentive to redeploy capital and the least incentive to grind out the tail. That happens when: (a) you're 30-50% through the RTR, (b) you have clean payment history (no NSFs, no defaults), (c) the funder has a renewal product ready to offer, and (d) you signal that you might shop elsewhere. The discount is smallest when you're 80%+ through the contract — there's almost nothing left to discount and the funder might as well collect the last few weeks linearly. **The honest framing.** Prepayment credit is one of the most asymmetric levers in the merchant's toolkit: 60 seconds of phone time can produce $5-15K of savings on a typical mid-size MCA. Funders rely on most merchants never asking. The merchant who asks every time — and asks the right question, in writing, with a specific date — captures the discount as a matter of course. The merchant who accepts the first-quoted balance leaves money on the table on every payoff, every time. ## Related terms - [Prepayment discount](https://fundnode.co/llms/glossary/prepayment-discount) — Reduction in the total MCA repayment when paid off early. Top funders offer 10–30% discounts; many funders charge full factor regardless of payoff speed. - [MCA prepayment clause](https://fundnode.co/llms/glossary/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 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 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. - [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. - [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. --- Source: https://fundnode.co/glossary/mca-prepayment-credit (HTML version) Document: MCA prepayment credit — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.