What That Funding Offer Really Costs You.
What you actually receive, what you repay, the estimated APR the agreement leaves out, and the clauses that can take your account or your house.
Quick answer
How do I know what a merchant cash advance really costs?
Start with what you actually receive after fees and any prior balance is paid off, then what you repay in total, and how fast: a daily or weekly payment over a short term. Those three figures give an estimated APR, which is often far higher than the factor rate suggests. Then check for a reconciliation right, a confession of judgment and a personal guaranty.
Who this mca & business loan review is for
- Small businesses offered a merchant cash advance or revenue-based financing
- Owners comparing a business loan, line of credit or equipment financing offer
- Businesses considering stacking a second advance or refinancing an existing one
- Anyone asked to sign a personal guaranty for business financing
What's at stake
The MCA & Business Loan clauses most people miss, and what they can cost you.
A 1.42 factor rate is not 42%
Fees come off the top, a renewal can pay off your old balance out of the new money, and daily debits repay it in months, not a year. We work out what you actually receive and the estimated APR from the real payments.
A clause that lets them take judgment without a hearing
Confessions of judgment, broad bank-debit authorizations and defaults triggered by a slow month can freeze your account before you can respond. We flag every one.
The reconciliation right you cannot actually use
An advance is supposed to flex with your sales. If adjusting the daily payment is at the funder’s discretion, it may not. We show exactly what the clause requires and how fast they must act.
What the mca & business loan review checks
- What you receive after fees and any old balance
- Total repayment and cost per dollar received
- Estimated APR from the actual payment schedule
- Reconciliation: how it works and who decides
- Confession of judgment and personal guaranty
- Daily debits and the ACH authorization
- Defaults triggered by slow sales or other financing
- Prepayment, renewals and blanket liens
What you get
- What you receive versus what you repay, side by side
- An estimated APR from the factor rate and payment schedule
- Reconciliation, confession of judgment and guaranty terms flagged
- The final payment date and any renewal or stacking terms
How to review a mca & business loan agreement
- 1
Upload the offer
The agreement, the payment schedule and any disclosure you were given.
- 2
Choose the product and state
An MCA, a term loan and a line of credit are read differently; some states require cost disclosures.
- 3
See what you receive and repay
Net funding, total repayment, the payment schedule and an estimated APR, calculated in code.
- 4
Decide with the facts
Questions for the provider and an email asking for changes. We describe the terms; we never tell you whether to take the money.
6 red flags in a mca & business loan agreement
What the review looks for first, and why each one matters.
A confession of judgment
It lets the provider obtain a judgment against you without a hearing.
No workable reconciliation right
If sales fall, the daily payment may not fall with them.
Fees deducted before funding
You receive less than the headline amount but repay on the full figure.
A prior balance paid off from the new advance
Refinancing can mean paying fees on money you never receive.
An unlimited personal guaranty
Your personal assets stand behind the business’s obligation.
A ban on other financing (anti-stacking) with harsh default terms
Taking any other funding can trigger a default.
MCA & Business Loan terms explained
- Merchant cash advance (MCA)
- Funding structured as a purchase of a share of future sales, repaid through daily or weekly debits.
- Factor rate
- A multiplier (for example 1.4) applied to the funded amount to give the total repayment; it is not an interest rate.
- Estimated APR
- The annualised cost of the financing, taking into account how quickly it is repaid.
- Reconciliation
- A right to have payments adjusted to match actual sales.
- Confession of judgment
- A document signed in advance allowing judgment to be entered without a hearing.
- Stacking
- Taking more than one advance or loan at the same time.
- Holdback
- The percentage of sales or fixed amount collected towards repayment.
Why review it with ClauseAudit
Results in minutes
Most contracts are read in about a minute; very long documents are split, read in full and returned as one report.
Read for your state
Several states now require cost disclosures for commercial financing, and rules on confessions of judgment differ. We show the general US position and tell you exactly what to confirm locally; we cite a state rule only once it has been checked against its source.
A fraction of a lawyer’s fee
From $19 a review. Take the report to an attorney and the conversation starts where it matters.
Plain English + a redline
Every risk explained, with a downloadable redline and a negotiation email.
One plan covers all eleven analyzers: Employment, Freelance, NDA, SaaS, Lease, Commercial Lease, Equipment & Vendor, MCA & Business Loan, Franchise, Business Purchase and Operating Agreement. Use your credits on any contract type.
MCA & Business Loan contract FAQs
How do I know what a merchant cash advance really costs?
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Start with what you actually receive after fees and any prior balance is paid off, then what you repay in total, and how fast: a daily or weekly payment over a short term. Those three figures give an estimated APR, which is often far higher than the factor rate suggests. Then check for a reconciliation right, a confession of judgment and a personal guaranty.
How do I work out the real cost of a merchant cash advance?
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Start with what actually reaches your account, after fees and any old balance paid off, not the advance amount. Compare that with the total you repay, and how quickly you repay it. We do this for you and estimate an APR from the actual payments, so you can compare the offer with a loan on one scale.
Is a merchant cash advance a loan?
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It depends on its terms and on state law, and courts look closely at whether repayment really rises and falls with your sales. We do not decide that. We show you what each term does and what it costs, and flag the clauses worth taking to a lawyer.
What is a confession of judgment?
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A clause letting the funder obtain a court judgment against you, and often your personal guarantor, without notice or a hearing. Some states restrict them. We flag it wherever it appears and suggest asking for it to be removed.
Does this work for SBA and bank loans too?
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Yes. Term loans and lines of credit get the same treatment: the real cost once fees are counted, prepayment penalties, balloon payments, liens and guaranties.
Why is the APR so much higher than the factor rate?
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A factor rate applies once, however quickly you repay. When repayment happens over a few months through daily debits, the annualised cost is much higher. The estimate is calculated in code from the agreement’s own figures and labelled as an estimate.
Do you say whether an MCA is a loan?
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No. We describe the terms and what they cost. Whether a particular agreement is treated as a loan is a legal question for a court or an attorney, and the report says so.
Related reviews
Equipment & Vendor review
What it really costs, when you have to cancel to stop it renewing, and what you owe if the equipment fails or the vendor disappears.
Franchise review
Every Item from fees to financials, what the fees cost at your own revenue figure, and how many franchisees have left the system, from a 400-page FDD in minutes.
Business Purchase review
Where the price really goes, what the seller note costs, what can be claimed after closing and for how long, read from your side of the deal.
Check your mca & business loan agreement before you sign
Upload it, choose your options and get the report. One plan covers all eleven analyzers.
Review my financing offerWritten and maintained by the ClauseAudit team. Last reviewed . General information, not legal advice, and not reviewed by an attorney. For a high-stakes agreement, consult a qualified attorney.
Have an offer to check? Upload the agreement and any fee schedule. See what it costs before you sign.
Review my offerFour kinds of funding, compared on one scale
A factor rate, a holdback and an interest rate cannot be compared as quoted. We work out what each offer really costs from its terms, run 17 checks weighted by the product, and describe what each clause does. We never decide whether an agreement is legally a loan.
Merchant cash advance
A lump sum now, repaid by daily or weekly debits from your bank account
- A factor rate that hides a very high annual cost
- Fees taken out before the money reaches you
- A reconciliation right that is hard to use in practice
Revenue-based financing
Repaid as a percentage of your revenue until a cap is reached
- The total repayment cap and how fast it is reached
- Minimum payments that apply even when revenue is low
- Access to your bank or payment-processor accounts
Business term loan
A fixed amount repaid over a set term with interest
- The real APR once fees are counted
- Prepayment penalties that remove the benefit of paying early
- A balloon payment at the end
Business line of credit
Draw what you need up to a limit, repaying what you use
- Draw fees and maintenance fees on top of interest
- The lender’s right to cut or freeze the line
- A variable rate with no cap