MCA Renewal
An MCA renewal is a subsequent advance funded to a merchant who has substantially repaid an existing position with the same funder — typically pricing and structure are improved versus initial advance based on demonstrated repayment performance and reduced underwriting risk.
Why This Matters
Renewals are the most profitable segment of MCA portfolios. A merchant who's paid 60-80% of their initial advance has demonstrated revenue stability and payment discipline — fundamentally lower risk than a new acquisition. Funders typically offer renewals at improved factor rates (5-15% better than initial), longer terms, and increased advance amounts. The economics: renewal acquisition cost is near-zero (no marketing or sales acquisition); approval rates exceed 70-80%; default rates run materially lower than first-time MCA. Top funders generate 40-60% of total deal volume from renewal portfolio.
Example
Merchant funded $40K initial advance at 1.38 factor, paid down to 75% over 6 months. Funder offers renewal: $60K new advance at 1.32 factor, 8-month term, 14% holdback (vs. original 17%). Merchant accepts — net new capital received $42K (after paying off 25% remaining on initial). Merchant gets favorable pricing; funder gets low-acquisition-cost premium-quality deal.
Frequently Asked Questions
Frequently Asked Questions
When in the original payback cycle is renewal typically offered?
Industry standard: 50-70% paid down. Earlier than 40% paid and the merchant doesn't feel the need for additional capital. Later than 80% paid and the merchant is shopping competing offers. Sweet spot is 60% paid for first renewal contact, with active follow-up through 80% paid.
What renewal rate do healthy funder portfolios achieve?
30-60% of merchants take a renewal from the same funder within 12 months of initial deal. Top performers exceed 60% renewal rate through proactive renewal outreach, competitive pricing, and relationship investment. Below 25% renewal rate suggests funder pricing or service is uncompetitive versus alternatives.