The MCA lifecycle has 7 stages: Application (15–30 min) → Underwriting (2–6 hrs) → Approval and Offer (1–4 hrs) → Contract Signing (30 min) → Funding (same-day to next business day) → Daily Repayment (3–18 months) → Payoff and UCC-3 Release. Renewal is available at 50–60% paydown. Total application-to-funding time: 24–72 hours.
The 7 MCA Lifecycle Stages
You complete a one-page application with basic business information: legal business name, EIN, time in business, average monthly revenue, and the amount you're requesting. No collateral commitment at this stage — application is non-binding.
What you'll submit:- One-page application
- 3–6 months of business bank statements (PDF)
- Government-issued ID
- Voided business check
- Most recent business tax return (sometimes required for larger advances $100K+)
The funder's underwriting team (or automated system) analyzes your bank statements for: average monthly deposits, deposit consistency, NSF frequency, existing MCA debt (identified via UCC-1 search), daily ending balance trends, and cash injection patterns (large one-time deposits that aren't real recurring revenue).
Underwriting is focused on cash flow behavior, not just FICO. A 560 FICO business with clean, consistent deposits often outperforms a 650 FICO business with erratic, NSF-heavy statements.
The funder issues a term sheet specifying: advance amount, factor rate (e.g., 1.28 — meaning $1.28 owed per $1.00 advanced), holdback percentage or fixed daily payment, and estimated payback period. This is a non-binding offer — you can negotiate or decline.
Key terms to evaluate:- Factor rate — multiply the advance by the factor rate to get total owed (e.g., $50,000 × 1.28 = $64,000 total repayment)
- Daily payment amount — make sure this is cashflow-sustainable
- Estimated term — 4–18 months is typical; longer term means lower daily payment but same total owed
- Stacking restrictions — many funders restrict you from taking additional advances while this one is active
You sign the merchant agreement (often called a Merchant Agreement or Purchase and Sale of Future Receivables agreement). Key items to read before signing:
- The reconciliation clause (does the contract allow you to lower daily payments if revenue drops?)
- The prepayment clause (can you pay off early, and is there a discount?)
- The confession of judgment clause (COJ) — if present, it allows the funder to enter judgment without notice if you default. NY banned COJs for commercial loans in 2019 for NY-based businesses.
- Personal guarantee — most MCAs include a personal guarantee from the business owner
Funds are ACH-deposited to your business bank account. Some funders offer wire transfer for same-day confirmed delivery (wire fees may apply). The funder simultaneously files a UCC-1 financing statement in your state, putting other potential lenders on notice that your receivables are pledged. This is normal and expected — UCC-1 does not affect your credit score.
Daily ACH debits begin typically 1–5 business days after funding. See the repayment section below for full mechanics.
When the total owed is repaid, ACH debits stop automatically. The funder files a UCC-3 termination statement, releasing the lien on your receivables. See the payoff section below for what to do if the UCC-3 doesn't arrive.
How Daily Repayment Works
MCA repayment structures fall into two models:
| Repayment Model | How It Works | Pros | Cons |
|---|---|---|---|
| Fixed Daily ACH | Same dollar amount debited every business day regardless of revenue | Predictable; easy to cash-flow plan | Revenue drops = strain; no automatic adjustment |
| Variable Holdback | A fixed percentage of daily card sales remitted by your card processor | Adjusts automatically to slow periods | Funder has access to your card processor split; less control |
Reconciliation Clause: If your contract has a reconciliation clause, you can request a payment adjustment during genuinely slow periods. The funder recalculates based on your actual revenue and adjusts the daily payment. This is a contractual right — use it if revenue drops more than 20% from your application-period average.
Renewal Strategy
Most funders offer renewal at 50–60% paydown of the original advance. Key renewal considerations:
- Renewal vs. second position — renewal replaces the old advance with a new one (preferred); second position stacks on top of the existing advance (expensive — avoid)
- Use renewal timing to negotiate — at 50% paydown you have leverage. You've proven repayment reliability. A competing funder offer forces your current funder to compete on rate
- Growing deposit history earns larger amounts — if your deposits have grown since the first advance, renewal typically unlocks a higher approval
- Don't renew too early — funders prefer longer repayment tracks. Renewing at 30% paydown signals urgency; 60–70% signals financial health
Payoff and UCC-3 Release
At final payoff:
- ACH debits stop on the day the account balance reaches zero
- Request a written payoff confirmation from the funder
- The funder is obligated to file a UCC-3 termination statement within a reasonable period (typically 20 days under UCC Article 9)
- If you don't receive UCC-3 confirmation within 60 days, contact the funder and request a copy of the UCC-3 filing number
- Verify the termination on your state's UCC online search database
UCC-1 left open after payoff is a common problem. An open UCC-1 from a previous funder is visible to every new funder and often triggers declination or reduction of a new offer. Never assume the termination was filed — verify it on your state's UCC database or request confirmation from the funder in writing.
Frequently Asked Questions
- How long does the MCA process take from application to funding?
- 24–72 hours total. Application: 15–30 minutes. Underwriting: 2–6 hours. Approval and offer review: 1–4 hours. Contract signing: 30 minutes. Funding: same-day to next business day via ACH.
- How does daily MCA repayment work?
- Daily ACH debit from your business bank account. Fixed daily model: a set dollar amount every business day. Variable holdback model: a fixed percentage of your daily card revenue. Fixed daily is more predictable; variable adjusts to revenue swings. Reconciliation clauses allow payment adjustments during sustained revenue drops.
- When can I renew my MCA?
- Most funders offer renewal at 50–60% paydown. At that point you can apply for a new advance, often at a higher amount if deposits have grown. Renewal is preferred over second-position stacking — it eliminates the old advance rather than adding to it. Use competing offers as leverage to negotiate better renewal terms.
- What happens at MCA payoff?
- ACH debits stop. The funder must file a UCC-3 termination releasing the lien on your receivables — typically within 30–60 days. Verify the termination on your state's UCC database. An open UCC-1 from a paid-off advance is one of the most common (and avoidable) reasons for new MCA declinations.
- What is a confession of judgment (COJ) in an MCA contract?
- A COJ is a clause authorizing the funder to enter judgment against you in court without a hearing if you default. New York banned COJs against NY-based merchants in commercial loans in 2019. Other states still permit them. Read your contract carefully — if a COJ is present, understand what triggers it (usually 5+ consecutive missed payments or ACH reversals).