Fair-Terms Checklist: 10 Questions to Ask Before You Sign an MCA

You have received an offer. The amount looks right. The holdback seems workable. You are ready to say yes — and then someone slides a document across the table and tells you to sign.

That moment is where merchants get hurt.

The offer is not the deal. The contract is. A good-sounding advance can become a damaging one if the written agreement contains terms that were never part of the conversation. The only protection you have is understanding exactly what you are agreeing to before you put your name on it.

A fair funder expects these questions. In fact, a fair funder will answer them clearly, in writing, without rushing you. If reading this list makes you feel like you are being demanding, remember: you are handing over a portion of your future revenue. You have every right to know the terms.

The 10 questions to ask every funder

1. What is the factor rate, and what is my total payback in dollars?

The factor rate is a decimal multiplier — commonly somewhere in the range of 1.1 to 1.5 — applied to the advance amount to calculate your total payback. If you receive $30,000 at a factor rate of 1.30, your total payback is $39,000. The $9,000 difference is the cost of the advance.

Ask the funder to state both numbers plainly: the factor rate as a decimal, and the total payback as a specific dollar figure. A funder who hedges on either number — or who quotes you an APR rather than a factor rate — is not being transparent about how MCA pricing works. We cover the distinction in detail in Factor Rate vs. APR: What an MCA Actually Costs.

2. What is the holdback percentage, and how and when is it collected?

The holdback (sometimes called the retrieval rate) is the percentage of your daily or weekly sales remitted toward repayment. It is often somewhere in the 10–20% range, though it varies by funder and offer. On a day you process $2,000 in card sales with a 15% holdback, $300 goes toward your balance.

Ask specifically: is collection tied to card sales, ACH from your bank account, or a combination? Is it daily or weekly? The timing and method matter for your cash-flow planning. Make sure the written agreement matches whatever was discussed verbally.

3. How long is repayment expected to take — and is there a cap on the payoff window?

Because holdback is revenue-linked, repayment duration depends on your sales volume. If sales slow, repayment stretches out. You should know the estimated term under typical conditions and whether the agreement caps the maximum payoff window.

An open-ended agreement can mean you are still paying months or years beyond what anyone projected. Ask the funder to confirm the estimated repayment timeline in writing, and find out whether there is any outer limit on how long the remittance obligation runs.

4. Is there a discount for paying off early, or a prepayment penalty?

Funder policies vary widely here. Some agreements offer a discount if you pay the remaining balance before the estimated payoff date — reducing your total cost because the factor rate was built assuming a full term. Others include prepayment penalties that make early payoff more expensive, not less.

Ask directly whether early payoff reduces your total cost, increases it, or has no effect. Get the answer in writing before you sign, not after you have funds in hand and want to close the balance.

5. What fees apply beyond the factor rate — origination, admin, or ACH?

Some MCAs carry additional fees that are separate from the factor rate: an origination or administration fee charged at funding, ACH processing fees collected on each remittance, or other items. These can add meaningful cost that the headline factor rate does not capture.

Ask the funder to list every fee that applies to your advance — not just the factor rate — and confirm the total out-of-pocket cost including all of them. A trustworthy funder can answer this in one sentence and point you to the corresponding line in the agreement.

6. Does the agreement include a confession of judgment or a personal guarantee?

These are two of the most consequential clauses in any MCA agreement, and they are worth understanding clearly.

A personal guarantee means that if your business cannot satisfy the obligation, you are personally responsible for the balance. Your personal assets — not just your business assets — can be pursued.

A confession of judgment (COJ) goes further. It is a clause by which you agree, in advance, to let the funder obtain a court judgment against you without filing a normal lawsuit, presenting evidence, or giving you an opportunity to contest the claim in court. If you default and the agreement contains a COJ, a funder can move directly to enforcing a judgment — freezing accounts or pursuing assets — before you have a chance to respond. Some states restrict or prohibit COJs; whether one is enforceable against you depends on where you are located and where the agreement was signed.

Ask your funder plainly whether either clause appears in your agreement. Read those sections yourself. If anything is unclear, consult an attorney or a trusted business advisor before signing — this is exactly the kind of question they are there to help you answer.

7. Will I have to switch or give a funder access to my payment processor?

Some MCA agreements require you to move your card processing to a processor designated by the funder — or to give the funder direct access to your current processor — so holdback can be collected at the source. That is how the revenue-linked remittance model typically works in practice.

Before you sign, understand whether you will need to change processors, what that means for your existing contracts and equipment, and whether access granted to the funder can be revoked if the advance is paid off. Switching processors mid-stream can disrupt your operations more than you expect.

8. What happens if my sales slow down — is there a reconciliation or true-up right?

One of the stated advantages of an MCA is that repayment is tied to your revenue: slower sales, smaller remittances. In practice, the degree to which this actually adjusts depends on the agreement.

Some agreements include an explicit reconciliation right — sometimes called a true-up — that allows the holdback to be recalculated if your sales drop materially below the level assumed at origination. Others do not. Ask whether your agreement includes such a right, how you would invoke it, and what documentation you would need to provide. For a fuller picture of how sales-pace risk works in an MCA, see Is a Merchant Cash Advance Right for Your Business?.

9. What exactly counts as a default, and what are the consequences?

Default triggers the agreement's enforcement provisions — which can include immediate collection of the full remaining balance, confession-of-judgment filings, or other remedies. You need to know precisely what actions or conditions would put you in default before you sign, not after something goes wrong.

Common default triggers include: changing your payment processor without authorization, closing your bank account, taking a second advance from another funder without approval (a "stacking" restriction), or allowing your remittance to fall below a certain threshold. Ask the funder to walk you through the default section and read it yourself. The language there is where the real risk lives.

10. Can I see the complete agreement, with every number filled in, before I commit?

This one is not a question about a specific clause — it is a question about the funder's basic conduct.

You should have a complete, final agreement with every field populated — your name, the advance amount, the factor rate, the holdback percentage, the total payback, every fee — before you are asked to sign. Not a template. Not a summary document. The actual agreement, final and complete.

If a funder pushes you to sign now with the promise that details will be confirmed later, that is not a process you should accept. You cannot evaluate what you cannot read.

Walk-away signs

Not every hesitation is a reason to walk away — some questions just need more time. But some patterns signal that a funder is not operating in good faith.

For a broader comparison of financing options — including when a term loan or line of credit might serve you better than an MCA — see MCA vs. Term Loan vs. Line of Credit vs. SBA Loan.

The bottom line

Asking these questions is not rude. It is not a sign that you distrust the funder. It is how good funders expect to be treated — because a good funder knows that a merchant who understands the terms is a merchant who can actually perform them.

A fair funder will answer every question on this list clearly, point you to the corresponding language in the written agreement, and give you time to review before you sign. A funder who resists the questions is telling you something important about how they will behave if things get difficult.

You are selling a portion of your future revenue. Take the time to understand exactly what that means in your specific contract. If anything in the agreement is unclear — especially the default provisions, any confession-of-judgment clause, or a personal guarantee — consider having an attorney or a trusted business advisor look it over before you commit.