What Is an MCA Prepayment Discount?

Short answer: An MCA prepayment discount is a contractual reduction in the total purchased amount if the merchant pays off the advance before a specific date or after a specific percentage of the balance is paid. It is an optional feature — not standard in every agreement — and the terms vary significantly by funder.

Why Prepayment Discounts Exist

Because factor rates are fixed, early payoff does not inherently reduce cost. A prepayment discount is how some funders share a portion of the time-value benefit of faster repayment with the merchant.

Think of it this way: if the funder expected repayment over 10 months and you pay in 4, they recover capital faster and can redeploy it. A discount formalizes that mutual benefit.

How Discounts Are Typically Structured

There is no universal format. Common structures include:

• Tiered discount by payoff date: Pay within 30 days: 10% discount on remaining balance. Pay within 60 days: 5% discount. After 90 days: no discount.
• Percentage-based reduction: If you pay off in full before a threshold, a fixed percentage of the total purchased amount is waived.
• Flat dollar reduction: A set dollar amount is removed from the remaining balance upon full payoff.

Example

You owe $12,000 remaining on a $30,000 total purchased amount. Your agreement includes a 10% prepayment discount if you pay within 30 days of the discount window opening. You pay $10,800 instead of $12,000 — saving $1,200.

What to Check Before Assuming a Discount Applies

• Is a prepayment discount clause written into your receivables purchase agreement? (If not, there is no discount.)
• What are the exact date or milestone triggers?
• Does the discount apply to the remaining balance or the original total?
• Is there a minimum payoff amount required to unlock the discount?

Read the agreement. If it's not in writing, it's not guaranteed.

Does Byzfunder offer a prepayment discount?

Yes — Byzfunder offers a discretionary early-payoff discount. On qualifying 30-day payoffs, the early-payoff cost can be as low as 2.99% (a 1.0299 payoff factor) instead of the full factor rate. It's a discretionary discount on the amount of receivables purchased — not interest saved — it varies by file, and it isn't guaranteed for every advance. Ask your Byzfunder representative whether your file qualifies.

Apply at byzfunder.com/apply and ask your Byzfunder representative to walk you through the prepayment terms in your offer.