- ACH debit
- An electronic withdrawal from your bank account. Most merchant cash advances are repaid by daily or weekly ACH debits.
- Anti-stacking clause
- A term in an MCA agreement that prohibits taking another advance against the same receivables. Breaking it can count as a default.
- APR (annual percentage rate)
- The yearly cost of borrowing expressed as a percentage. MCAs are priced with a factor rate instead, but their APR equivalent is often over 50% and can exceed 100%. See the MCA calculator.
- Balloon payment
- A large final payment due at the end of a financing term.
- Blanket lien
- A UCC filing that covers all of a business's assets rather than specific equipment or receivables.
- Cancellation-of-debt income
- The amount of a debt that is forgiven, which can be taxable. Creditors may report it on Form 1099-C.
- Confession of judgment (COJ)
- A signed statement, included in some MCA agreements, that lets the funder obtain a court judgment without a lawsuit if you default. New York stopped allowing them to be filed against out-of-state businesses in 2019.
- Default
- A breach of the agreement, such as missed payments, blocked debits, switching banks or taking another advance, that lets the funder demand the full balance and pursue collection. See MCA default help.
- Default fee
- A charge added to the balance when an agreement is breached, often a flat amount or a percentage of the balance.
- Early payoff discount
- A reduction some funders offer if you repay the advance before it is due. Without one, paying early does not reduce an MCA's cost.
- Factor rate
- The multiplier that sets an MCA's total payback. A $50,000 advance at a 1.38 factor rate costs $69,000.
- First position
- The first funder to advance against your receivables. Later funders are in second, third or later positions.
- Forbearance
- A temporary pause or reduction in payments agreed by the creditor.
- Funder
- The company that provides a merchant cash advance. Also called an MCA provider or MCA lender, though technically it buys receivables rather than lending.
- Holdback (retrieval rate)
- The percentage of daily card sales taken to repay an advance when payments are tied to sales rather than a fixed debit.
- ISO (independent sales organization)
- A broker that sells merchant cash advances on behalf of funders and earns a commission.
- Judgment
- A court ruling that you owe a debt. It lets the creditor pursue bank levies, liens or garnishment.
- Lump-sum settlement
- A single payment that resolves a debt for less than the full balance.
- Merchant cash advance (MCA)
- Business funding in which a funder buys a share of your future sales at a discount and collects it through daily or weekly debits.
- Personal guarantee
- A promise by the owner to be personally responsible if the business breaches the agreement.
- Purchased amount
- The total the funder is entitled to collect: the advance times the factor rate.
- Reconciliation
- A contractual adjustment of fixed MCA payments to match the agreed percentage of actual sales. See MCA reconciliation.
- Renewal
- A new advance taken before the old one is repaid, with part of the new money used to pay off the old balance.
- Restructuring
- A negotiated change to the terms of existing debt, usually a smaller payment over a longer period. See MCA restructuring.
- Reverse consolidation
- A new advance that deposits money to cover your existing MCA payments for a period. It lowers payments temporarily and usually raises total cost.
- Settlement
- An agreement to resolve a debt for less than the full balance. See MCA debt settlement.
- Specified percentage
- The share of future receivables a funder buys in an MCA agreement, used to calculate payments and reconciliations.
- Stacking
- Taking several merchant cash advances at the same time, often from different funders. See stacked MCA debt.
- True sale
- The legal position that an MCA is a purchase of receivables, not a loan. It matters because loans are subject to usury limits.
- UCC-1 filing
- A public notice that a creditor has a security interest in a business's assets or receivables. See UCC lien help.
- UCC-3 termination
- The filing that releases a UCC-1 lien once a debt is paid or settled.
- Usury
- Charging interest above the legal limit. Some MCA disputes argue the agreement is really a usurious loan.
