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Can You Negotiate an MCA?

Merchant cash advances (MCAs) have become an increasingly popular form of business financing in recent years. But unlike traditional small business loans, the terms of an MCA can seem rigid and non-negotiable. So a common question that comes up is – can you actually negotiate an MCA?

The short answer is yes, you can often negotiate various aspects of an MCA offer. However, there are some key limitations you need to be aware of compared to negotiating a bank loan. Let’s break down what can and can’t be negotiated with an MCA provider.

What Can Be Negotiated

Here are some of the main terms of an MCA that may be open to negotiation:

Purchase Price: This refers to the total dollar amount being advanced by the MCA provider. While offers are primarily based on a business’ average monthly credit card sales, there is often room to get the purchase price increased or decreased. A lower purchase price means less money owed overall.

Payback Amount: This is the total repayment amount including fees and interest over the payback period. Payback amounts can vary greatly between MCA offers, so be sure to negotiate for the lowest reasonable number. Lower is always better.

Daily Payment Percentage: Most MCAs structure repayment as a fixed percentage of daily credit card sales, averaging 10-20% typically. There may be some flexibility to get this daily rate reduced through negotiation.

Payback Period: The duration of time over which daily payments are made until the MCA is repaid in full. Longer payback periods mean lower daily payment burdens, so negotiating a longer term can help cash flow.

Personal Guarantee: Many MCAs require business owners to personally guarantee the advance, meaning their personal credit and assets are on the hook for repayment. See if this personal guarantee requirement can be waived.

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Getting Approved: In some cases, negotiating happens around simply getting approved for any MCA at all. Providers may be willing to relax standards or offer smaller amounts to borderline applicants. So don’t hesitate to negotiate the initial approval terms if needed.

When negotiating an MCA, the strategy that typically works best is to apply with multiple providers and create competition. This allows you to leverage multiple offers against each other to get improved terms from one or more providers.

What Can’t Be Negotiated

While the aspects above may have some flexibility, there are certain MCA terms that generally are not negotiable:

Repayment Structure: The underlying repayment structure of fixed daily payments as a percentage of credit card sales is standard. Requests to make payments monthly or quarterly instead are usually non-starters.

Upfront Fees: Many MCA providers charge upfront origination fees of 1-3% deducted from the advance amount. These fees are rarely waivable through negotiation.

Collateralization: MCAs don’t feature direct collateral requirements like business loans. So requests to use collateral to secure better terms are generally ineffective.

Covenants: Traditional business loans often have financial covenants requiring certain profitability or cash flow levels. But MCAs do not involve these types of covenant restrictions.

In summary – negotiation is definitely possible and recommended with an MCA offer, but only around specific terms. The core repayment structure and mechanics of an MCA are not really negotiable.

Negotiation Strategies and Tips

If you do decide to enter MCA negotiations, here are some key strategies and tips to increase your chances of success:

Get Offers from Multiple Providers: Having multiple MCA offers in hand gives you leverage to pit providers against one another and create bidding competition for your business. This is by far the most effective overall approach.

Focus Negotiations on 1-2 Key Terms: Trying to renegotiate every aspect of an MCA offer is unlikely to work. Choose just 1 or 2 priority terms to focus negotiations on such as purchase price or payback period.

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Be Reasonable and Data-Driven: Any negotiation arguments around improved terms need to be reasonable and backed up by data from your business’ finances. Emotional pleas or unreasonable requests will be denied.

Avoid Desperation: Making it seem like you desperately need MCA financing reduces negotiation leverage. Even if you do need financing urgently, project confidence in discussions with providers.

Use a Broker: Working with an independent MCA broker provides a buffer between you and funders. In addition to shopping multiple offers, a good broker can handle negotiations on your behalf.

Have a Walk Away Point: Know ahead of time what MCA terms would be unacceptable and be willing to walk away from offers that don’t measure up after negotiation. Don’t take a bad deal just because.

Get it in Writing: Any agreed improvements from negotiations must be formally documented in the MCA contract before signing. Following up in writing is crucial.

By entering negotiations in an informed manner and employing these tactics, your chances of emerging with an improved MCA offer are high.

Common MCA Negotiation Outcomes

To give you a sense of realistic outcomes from MCA negotiations, here are some examples:

Original offer:

  • Purchase price of $100,000
  • Payback amount of $130,000
  • Daily rate of 15%
  • 6-month term

Negotiated offer:

  • Purchase price of $120,000
  • Payback amount of $140,000
  • Daily rate of 12%
  • 9-month term

Original offer:

  • Purchase price of $75,000
  • Payback amount of $97,500
  • Daily rate of 15%
  • 6-month term

Negotiated offer:

  • Purchase price of $90,000
  • Payback amount unchanged
  • Daily rate unchanged
  • 9-month term

Original offer:

  • Purchase price of $200,000
  • Payback amount of $260,000
  • Daily rate of 18%
  • 9-month term

Negotiated offer:

  • Purchase price unchanged
  • Payback amount of $240,000
  • Daily rate of 15%
  • 12-month term
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As you can see, negotiation outcomes can vary greatly depending on the priorities you establish and how reasonable the original offer was. The keys are focusing on one or two important terms and having competing offers in hand.

How a Business Attorney Can Help

Working with an experienced business attorney can be extremely helpful if you plan to negotiate an MCA offer. An attorney brings professional negotiation skills and knowledge of commercial financing contracts to the table.

Specifically, a lawyer can help by:

  • Reviewing multiple MCA contracts in detail before signing
  • Identifying the most negotiable and problematic terms
  • Leading negotiations with providers to improve offers
  • Ensuring any agreed concessions are documented properly
  • Advising you on the overall prudence of the MCA financing

Having a legal professional in your corner watching out for your best interests adds tremendous value when dealing with MCA providers. Consider retaining counsel as part of your overall negotiation preparations and strategy.

The Bottom Line

Negotiating some aspects of an MCA offer is often possible with the right approach – particularly the purchase price, payback amount, rates, and term length. You just need to understand which terms are flexible vs fixed going in. Employing multiple offers, focusing negotiations narrowly, using data, and avoiding desperation are all key tactics. And seeking professional legal guidance can further bolster your negotiating position.

While MCA contracts are presented more as rigid take-it-or-leave-it options, funders actually expect a certain level of back and forth. So if you receive an initial offer that seems unreasonable, don’t hesitate to try pushing back on terms to better meet your business needs. Just recognize negotiations have limits with MCAs compared to other financing instruments. With some savvy and concerted effort, an improved MCA offer could be in reach.






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