# MCA renewal strategy (typical) > A typical MCA renewal happens when 50–70% of the original advance is paid off (Day 90–150 of a 9-month term). Funder offers a new advance at slightly better factor, with the remaining balance rolled in (refinance) or paid off separately (standalone renewal). Renewal is the lifeblood of MCA economics. A funder that closes one deal with a merchant earns one commission; a funder that renews three times earns three. Both funder and broker structure their businesses around renewal capture. **When renewal happens.** Most MCA funders begin offering renewals when: - 50–70% of the original advance is paid down (in dollar terms), AND - The merchant has 90+ days of clean payment history (no NSFs, no missed daily debits), AND - Bank statements show maintained or improved revenue. For a 9-month term, this typically means Day 90 to Day 150. **Two renewal structures.** **Refinance renewal.** The new advance pays off the remaining balance of the old advance and provides additional cash to the merchant. Example: Original $50K advance with $15K remaining balance. Renewal offer: $80K new advance, of which $15K pays off old contract and $65K goes to merchant. Merchant now owes $80K × new factor instead of $15K × old factor. - **Pro for merchant.** Single payment stream, no overlap. - **Con for merchant.** Effectively paying interest on already-paid principal. **Standalone renewal (stacking-friendly).** The new advance is in addition to the old contract; merchant continues paying both. Example: Original $50K advance with $15K remaining. New $50K advance funded; merchant now pays daily debits on both contracts simultaneously until each is satisfied. - **Pro for merchant.** Final payoff cost lower (no double interest). - **Con for merchant.** Two daily debits compress cash flow. - **Catch.** Some MCAs prohibit "stacking" — standalone renewal with same funder usually allowed, but with another funder may violate contract. **Typical pricing improvement.** A clean-payment merchant typically sees: - **First renewal.** Factor improves by 0.02–0.05 (1.30 → 1.25 to 1.28). - **Second renewal.** Factor improves by 0.03–0.07 (1.25 → 1.18 to 1.22). - **Third renewal+.** Best pricing the funder offers (often A-paper rates). **Why funders prioritize renewals.** 1. **Lower acquisition cost.** No broker commission needed (renewal commission to broker is typically 2–4%, vs. 6–10% on new deals). 2. **Better risk profile.** Merchant has demonstrated payment behavior; underwriting confidence is high. 3. **Higher LTV.** Avg merchant tenure for funders with strong renewal programs is 3–5 advances over 24–36 months. **Why brokers push renewals.** 1. **Easier sale.** Existing relationship; less convincing required. 2. **Recurring revenue.** Quarterly renewal commissions stabilize broker income. 3. **Stickier merchant.** Renewing merchant unlikely to shop competitive offers. **Why merchants accept renewals.** 1. **Cash flow continuity.** Same daily debit pattern; no operational change. 2. **Known process.** No new application, minimal documents. 3. **Familiar funder.** Trust built; no surprises expected. 4. **Slightly better pricing.** Real discount vs. shopping fresh. **Where the renewal trap appears.** 1. **Refinance math.** Merchant who would have paid off in 60 days now owes for another 9 months on rolled-in balance. Total interest exceeds shopping. 2. **Pricing complacency.** Renewal pricing improves slightly but is still inferior to competitor first-time pricing in many cases. 3. **Stacking encouragement.** Funders sometimes offer renewal that quietly enables stacking (additional advance without paying off original), driving up merchant total debt. 4. **Comfort capture.** Merchant stops shopping after first relationship; never sees competitive market. **Best practice for merchants.** 1. **Shop the renewal.** Always get 2 competitive quotes when funder offers renewal. 2. **Calculate the rolled-in cost.** Compare refinance vs. paying off existing balance and taking a new fresh advance. 3. **Resist stacking.** Add to existing balance only if cash need is real and structured payoff plan exists. 4. **Negotiate.** Renewal offers are highly negotiable; first quote is rarely the funder's best. **Renewal metrics by funder size.** - **Large PE-backed funders (OnDeck, Credibly, Kapitus).** First-renewal rates 50–65%. - **Mid-size funders.** First-renewal rates 35–50%. - **Small / aggressive funders.** First-renewal rates 25–35% (merchants often shop away). **Common confusion.** First, "renewal is always better than refinance with new funder" — not true; new funder may offer better factor and avoid rolled-in interest. Second, "renewal locks me in for X months" — only if you sign; you can decline a renewal offer and continue paying current contract to completion. Third, "renewal requires hard credit pull" — usually soft pull; funder already has all your data. ## Related terms - [MCA renewal relationship discount](https://fundnode.co/llms/glossary/mca-renewal-relationship-discount) — A factor-rate reduction that funders offer existing merchants at renewal as a customer-retention incentive; typical discount is 0.02–0.08 off the factor (e.g., 1.32 → 1.27), worth $2K–$8K on a $100K advance, but rarely volunteered — merchants must ask and threaten to leave. - [MCA renewal discount vs original](https://fundnode.co/llms/glossary/mca-renewal-discount-vs-original) — MCA renewal discounts reduce factor rates on the new advance by 0.02–0.10 below the original (e.g., 1.30 → 1.22), but the remaining balance from the original is rolled into the new advance, often producing higher absolute fees than the discount suggests. - [Stacking (MCAs)](https://fundnode.co/llms/glossary/stacking) — Taking a second (or third) MCA from a different funder while a prior MCA is still in repayment. Default risk skyrockets; it breaches most original-funder contracts. - [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. - [MCA portfolio consolidation](https://fundnode.co/llms/glossary/mca-portfolio-consolidation) — MCA portfolio consolidation replaces 2–4 existing advances with one new advance, reducing daily payments and extending term. Total cost is typically higher, but cash flow improves significantly. Available from a small set of specialized consolidation funders. --- Source: https://fundnode.co/glossary/mca-renewal-strategy-typical (HTML version) Document: MCA renewal strategy (typical) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.