How does a merchant cash advance renewal work?

How does a merchant cash advance renewal work?

A Merchant Cash Advance (MCA) renewal allows a business that has already taken out an MCA to obtain additional funding before fully repaying the initial advance. This renewal process essentially provides a new MCA, combining it with the remaining balance of the existing advance. Here’s how it typically works:

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1. Eligibility for Renewal

  • To qualify for an MCA renewal, the business usually needs to have repaid a significant portion of the original MCA—often between 50-80% of the initial amount, depending on the provider’s policies.
  • The provider may also check that the business’s sales and revenue remain steady or have improved since the original MCA to ensure it can handle the additional funding.

2. Application and Review Process

  • The renewal process is typically faster and simpler than the original MCA because the provider already has the business’s financial information and payment history.
  • The business may need to provide updated financial statements, recent bank statements, and recent credit card sales records if required.


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How merchant cash advance renewal work?

3. Calculating the New Advance

  • With renewal, the provider offers a new advance amount, which is usually calculated based on the business’s current sales volume and repayment history.
  • Remaining Balance Consolidation: The remaining balance on the original MCA is added to the new advance amount, creating a single, larger advance. This approach streamlines the repayment process and provides the business with fresh capital while settling the remaining balance of the prior advance.

4. Repayment Terms and Factor Rate

  • The renewal may come with a new factor rate (usually 1.1 to 1.5) applied to the entire renewed balance, increasing the total repayment amount.
  • Repayment will continue through a percentage of daily or weekly sales or fixed ACH withdrawals. The new terms may vary slightly from the original MCA terms, depending on the provider’s assessment of the business’s risk and financial standing.

5. Potential Benefits of MCA Renewal

  • Increased Working Capital: MCA renewal allows the business to access additional funds to cover expenses, inventory, or expansion needs without waiting to fully repay the first MCA.
  • Simplified Repayment: By combining the old balance with the new advance, the business manages a single repayment stream rather than juggling multiple advances.

6. Considerations and Risks

  • Higher Total Repayment: Each renewal typically increases the total amount the business will repay due to the new factor rate applied to the combined balance.
  • Cycle of Debt: Some businesses can fall into a cycle of dependency on MCA renewals, taking on additional advances to cover existing debt, which can strain finances if cash flow doesn’t support the ongoing repayment demands.
  • Impact on Cash Flow: Renewed advances mean continued daily or weekly payments, which can be challenging for businesses with fluctuating revenue.


In summary, an MCA renewal is a way for businesses to receive additional funding by combining it with the remaining balance on an existing MCA. This provides quick access to extra capital but can lead to higher total repayment amounts and cash flow pressures, so it’s important for businesses to weigh these factors carefully.

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