Hidden MCA Fees: What Business Owners Need to Know

Merchant cash advances offer fast funding with flexible requirements, but the fine print can contain fees that catch business owners off guard. Understanding these potential costs before you sign is essential to avoiding unpleasant surprises.

Common Hidden Fees in MCAs

1. Origination Fees

Some funders charge an origination fee ranging from 2% to 5% of the advance amount. This fee is often deducted from your funding before you receive it, meaning you could get less than you expected while still repaying the full amount.

2. Wire Transfer Fees

If you need funding fast, wire transfer fees can add $25 to $50 per transfer. Some funders also charge for expedited funding, which can cost an additional 1-2% of the advance.

3. Early Repayment Penalties

While MCAs are technically not loans and therefore do not have traditional early payoff penalties, some agreements include "reconveyance fees" or prepayment penalties that can range from 5% to 20% of the remaining balance. Always ask about prepayment terms before signing.

4. Lock Fee

If you want to lock in a specific factor rate or payment amount, some funders charge a lock fee. This is typically 1% of the advance and is added to your total repayment.

5. Maintenance or Servicing Fees

Monthly maintenance fees of $15 to $50 can add up over time. These fees are sometimes buried in the agreement and charged automatically each month.

How to Identify Hidden Fees

• Read the entire agreement: Don't skip the fine print. Pay special attention to any section labeled "Fees," "Costs," or "Additional Charges."
• Ask for a complete breakdown: Request a schedule of all fees in writing before signing. A reputable funder will provide this without hesitation.
• Calculate the true cost: Use our funding calculator to estimate total repayment including all known fees.
• Compare offers: Get quotes from multiple funders and compare the total cost, not just the factor rate.
• Ask about every fee: If anything is unclear, ask specifically about origination fees, wire fees, prepayment penalties, and any other charges.

Red Flags to Watch For

• Vague language around fees in the agreement
• Reluctance to provide a complete fee schedule
• Pressure to sign quickly without reviewing the documents
• Claims that there are "no fees" or "everything is included"
• Agreements that use unusual terminology to describe standard charges

What Velica Capital Does Differently

We believe in transparent terms. Before you sign anything, we provide a clear breakdown of all costs associated with your funding. Our team is available to answer questions about any fee, and we never pressure you to sign quickly.

If you have questions about MCA fees or want to compare funding options, contact us or apply online to see what you qualify for.