Free Merchant Cash Advance Review Checklist Template
A checklist for reviewing a merchant cash advance offer: factor rate, estimated APR, holdback, reconciliation, confession of judgment, guarantees and stacking.
A merchant cash advance (MCA) gives a business a lump sum in exchange for a share of future sales, repaid through daily or weekly debits. It is often far more expensive than a loan, so check the factor rate, estimated APR, reconciliation rights, personal guarantee and any confession of judgment before signing.
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MERCHANT CASH ADVANCE (MCA) OFFER REVIEW CHECKLIST
Business: [BUSINESS NAME] Funder: [FUNDER NAME] Offer date: [DATE]
This checklist helps you understand an MCA offer before you sign. It is not legal or financial advice.
A. THE NUMBERS
[ ] Amount you receive (after any fees deducted): $______
[ ] Purchased amount you must deliver (total payback): $______
[ ] Factor rate (payback ÷ advance): ______ (for example, 1.35 means you repay $1.35 for every $1 received)
[ ] Fees deducted or charged: origination $______ / underwriting $______ / other $______
[ ] Daily or weekly remittance: $______ per [day / week]
[ ] Expected term: ______ months
[ ] Estimated APR (ask the funder; several states, including California and New York, require an estimated APR or similar cost disclosure for commercial financing): ______%
[ ] Total cost of the advance: payback minus amount received = $______
B. HOW IT IS COLLECTED
[ ] Is the remittance a percentage of actual sales (the specified percentage / holdback: ______%) or a fixed amount?
[ ] Is there a reconciliation clause letting you ask for lower payments if your sales fall? How do you request it, and how quickly must the funder respond?
[ ] What happens if a debit fails? Fees per failed debit: $______
C. RISK TERMS
[ ] Personal guarantee: is it limited to fraud or breach of specific promises ("performance guarantee"), or does it guarantee repayment?
[ ] Confession of judgment: does the agreement let the funder obtain a judgment without a lawsuit? (Restricted in several states; for example, New York limits their use against out-of-state businesses.)
[ ] Security interest: does the funder take a UCC lien on all business assets?
[ ] Default triggers: what counts as default (changing bank accounts, blocking debits, selling the business, taking other financing)?
[ ] Anti-stacking clause: does it prohibit other financing, and what happens if you take it?
[ ] Venue and arbitration: where would disputes be heard?
D. COMPARE BEFORE SIGNING
[ ] Quotes from at least two other options (bank line of credit, SBA loan, equipment financing, invoice financing): ______
[ ] Will the daily debit leave enough cash to run the business in a slow month? ______
[ ] Is this advance being used to pay off another advance (stacking)? If so, stop and get advice.
E. QUESTIONS TO ASK THE FUNDER
1. What is the estimated APR based on my expected sales?
2. How does reconciliation work, and can I see an example?
3. Is there a discount if I pay early?
4. Is the personal guarantee limited to fraud or performance, or does it cover repayment?
5. Does the agreement include a confession of judgment?
6. What is the exact total of all fees?
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This free template is provided by ClauseAudit for general informational purposes and is not legal advice. Have it reviewed before use. Replace all [BRACKETED] placeholders.When to use this template
- A business has received a merchant cash advance or revenue-based financing offer.
- Comparing an MCA with a loan or line of credit.
- Before signing a renewal or a second advance.
How to fill it in
- Enter the advance, payback and fees from the offer.
- Calculate the factor rate and total cost.
- Ask the funder for an estimated APR; some states require it.
- Check each risk term in the agreement.
- Compare at least two other financing options before signing.
Key clauses to check
- Factor rate
- Looks small but can equal a very high APR on a short term.
- Reconciliation
- Lets payments fall when sales fall; without it the advance behaves like a high-cost loan.
- Personal guarantee
- Performance-only guarantees are narrower than payment guarantees.
- Confession of judgment
- Allows fast judgment without a lawsuit; restricted in several states.
- Stacking
- Taking a second advance to pay the first often leads to a debt spiral.
Frequently asked questions
Is a merchant cash advance a loan?
It is usually structured as a purchase of future receivables, not a loan, which can mean fewer consumer-style protections. Courts sometimes treat MCAs with fixed payments and no real reconciliation as loans.
How do I calculate the APR of an MCA?
APR depends on the factor rate, fees and how quickly you repay. A shorter repayment period means a higher APR. Ask the funder for an estimate and compare it with loan offers.
What is a confession of judgment in an MCA?
A clause letting the funder get a court judgment against you without a lawsuit if you default. Several states restrict them.
Want to check if a contract is fair before you sign?
If someone sent you a mca & business loan contract, don't guess. We flag risky clauses in plain English, tuned to your state, with a downloadable report and suggested-fix redline.
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This free template is general information, not legal advice, and is no substitute for a qualified attorney. Laws vary by state; have it reviewed by a lawyer before you use or sign it.