# MCA renewal incentive

> A package of price concessions — discounted remaining balance, lower factor on new money, fee waivers — that funders offer at ~50–65% paydown to lock merchants into a second advance before they shop the market.

An MCA renewal incentive is the bundle of pricing concessions a funder offers an existing merchant to take a new advance before the current one is fully repaid. By 2026 it is the single largest revenue-retention lever in the MCA stack; for many top-50 funders, 55–70% of monthly fundings are renewals rather than net-new merchants.

**The trigger point — when the offer arrives.** Funders monitor paydown in real time via the daily ACH ledger. The renewal team is typically pinged when the remaining balance crosses one of three thresholds:

1. **50% paid down.** First "soft" outreach — usually an email or ISO ping rather than a formal offer.
2. **60–65% paid down.** Formal renewal term sheet with discount on the remaining balance baked in.
3. **75%+ paid down.** Aggressive offer — sometimes including a fee waiver, factor reduction, or larger advance, especially if the merchant has been a clean payer.

**The mechanics — what is actually being offered.** Five common concessions, usually bundled:

1. **Balance discount.** Remaining balance is "forgiven" at a 5–20% discount as part of rolling into the new advance. On a $40K remaining balance, a 10% discount = $4K saved.
2. **Lower factor on new money.** The fresh capital portion gets a factor 0.02–0.05 lower than the prior advance (e.g., 1.32 → 1.28).
3. **Fee waivers.** Origination, ACH setup, or wire fees waived for renewals.
4. **Larger advance amount.** Funders increase the second advance by 20–40% vs the first, based on demonstrated payment performance.
5. **Term flexibility.** Renewal term may stretch longer (12 months vs 9), reducing the daily payment even though the total cost rises.

**The math — why funders push renewals so hard.** Two reasons:

1. **Customer acquisition cost is sunk.** The first advance already paid for the ISO commission (8–15% of funded amount). The renewal commission is typically 3–6%. Funder margin on the second deal is 2–3x the first.
2. **The "true APR" compounds.** A merchant on a 1.30 factor 9-month advance who renews at 60% paydown is effectively paying interest on the unpaid balance plus a fresh factor on the new money — the blended effective APR over a 24-month renewal chain often exceeds 120%.

**The strategic insight — what merchants should know.** Three points:

1. **The "discount" is on a number you already owe.** A 10% discount on the remaining balance is real savings — but only vs not renewing at all. If you compare against paying down to zero and shopping the open market, the renewal is usually 15–30% more expensive than a fresh A-paper advance from a competing funder.
2. **The factor on new money is the comparison number.** Ignore the headline "renewal discount" framing and ask: "What is the factor rate I would get on a $X advance, fresh, with no rollover?" That is the only price you can actually shop.
3. **Funders count on inertia.** Most merchants do not shop at renewal — they renew with the funder they already know. Funders price renewals 5–15% above competitive market because they can.

**The honest framing.** Renewal incentives are a customer-retention tool dressed up as a benefit. They work because they are easier than shopping, faster to fund (often same-day approval since underwriting data is fresh), and the funder relationship is already established. But they are rarely the best price available — they are the best price your existing funder is willing to offer to keep you off the open market. Merchants with clean payment history and 60%+ paydown almost always qualify for better terms from a competing A-paper funder; the renewal offer should be treated as a floor, not a ceiling.

## Related terms

- [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 renewal incentives](https://fundnode.co/llms/glossary/mca-renewal-incentives) — Funder-offered concessions to retain a paying merchant at refinance time — typically factor-rate discount (3-8 points off the original deal), expedited approval, fee waivers, prepayment credit on the existing balance, or a larger advance than independent shop quotes.
- [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.

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Source: https://fundnode.co/glossary/mca-renewal-incentive (HTML version)
Document: MCA renewal incentive — Fundnode MCA Glossary
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