Funding types

MCA buyout: how a funder pays off your existing advance

A buyout is when a new funder pays your current advance off directly and replaces it with one position. It is how businesses get out from under daily payments they can no longer carry.

Best for: Businesses carrying one or more advances
Speed: Often days
Credit: Deposits matter most; credit weighs less
Repayment: One payment replacing several
Collateral: Existing positions paid off directly

A buyout means a new funder pays your existing advance off in full and issues you a new one. The old position closes. You are left with a single payment instead of several, usually over a longer term, which lowers what comes out of your account each day or week.

How it actually works

The new funder asks for your payoff letter. This comes from the existing funder and states exactly what is owed to close the position today.
They underwrite the new position against your deposits, taking the payoff amount into account.
The payoff goes direct to the old funder, not to you. That is the part that makes it a buyout rather than another advance.
Any remainder comes to you, if the new advance is larger than the payoff.
One payment starts, and the old debits stop.

Full buyout against partial

Full buyout: the old position is closed completely. Cleanest outcome, and the only one that truly stops the old debits.
Partial buyout: the new funder pays down part of the balance and the old position continues alongside the new one. Cheaper to arrange, but you still have two payments, so be certain that is what you are signing.

When a buyout is the right move

The daily or weekly payments are consuming more cash than the business can spare.
You are carrying two or more positions and want one schedule.
You took an advance on short terms and need the payment spread out.
You need additional capital but cannot service another payment on top of what you have.

What it costs, honestly

A buyout is not free money. The payoff amount is rolled into the new advance, so you are financing the old balance again at a new rate. The trade is cash flow now against total cost later. That trade is worth making when the current payments are threatening the business, and it is not worth making simply to free up cash you will spend on something that does not earn.

Ask for three numbers before you sign: the total payback, the new payment and its frequency, and whether there is a discount for paying it off early.

What an underwriter checks on a buyout file

The payoff letter, and how much of the original advance is left.
Whether your deposits have held up since the original advance started.
Negative days since it started, which is the clearest sign the payment is too heavy.
How many positions there are in total.

Questions owners ask

What is a payoff letter?

A statement from your current funder saying exactly what is owed to close the advance today. A new funder cannot structure a buyout without it, and it is usually a quick request.

Does a buyout hurt my credit?

Many advance funders do not report to personal credit bureaus, so a buyout often does not appear on a personal report. The effect is on cash flow rather than on the score.

Can I get extra cash in a buyout?

Often yes. If the new advance is larger than the payoff, the difference comes to you. Whether that is wise depends on what the extra money is for.

Is a buyout the same as refinancing?

They are used interchangeably in practice. A buyout emphasises that the old position is paid off directly by the new funder rather than by you.