Origination Fee
An origination fee is the upfront charge MCA funders deduct from the advance amount before delivering net funds to the merchant — typically 2-5% of gross advance — covering underwriting costs, broker commissions, and contributing to overall funder margin.
Why This Matters
Origination fees are standard in MCA structures, distinct from the factor rate that defines repayment. A $50,000 advance with 4% origination fee delivers $48,000 net to the merchant while the merchant repays based on the full $50,000 × factor rate. The origination structure affects effective cost calculation significantly — same factor rate produces higher effective cost when origination fees are larger. Some funders price low headline factor rates with high origination fees to appear competitive on factor rate alone; sophisticated buyers calculate true cost including all fees.
Frequently Asked Questions
Frequently Asked Questions
What's a typical MCA origination fee range?
2-5% of gross advance is standard range. Mainstream funders typically charge 3-4%. Specialty programs (high-risk, large amount) may charge 5-7%. Some funders offer 'no origination fee' programs that compensate through higher factor rates — net cost is similar.
Are MCA origination fees negotiable?
Sometimes for larger deals or established broker relationships. ISOs with significant volume may negotiate origination fee waivers in exchange for committed deal flow. Individual merchants rarely negotiate origination fees directly — the fee structure is largely determined by funder pricing models.