Hi all,

I have been in the MCA industry for about a year now and have become quite familiar with the different programs offered by the funders that my ISO works with. The standard renewal concept in this space has perplexed me for some time and I was hoping some of the veterans here may be able to shed some light on the policy.

It seems that the way renewal offers are consistently structured is that the merchant is made a "second position offer" that buys out the first position, and nets the proceeds (I am aware of an 'add-on' type product but have only ever seen this offered once, when there are probably 100+ funders in the space.) This leaves the merchant paying interest on top of interest, oftentimes at a higher daily payment, with little extension on the term. Have merchants simply not caught onto this yet? Why would anyone consider it a good business practice to provide a worse offer to someone who is interested in being a repeat customer of yours (not to mention has been a reliable with repayment)? It seems to me with this practice it is no wonder that merchants would prefer to stack from an entirely different company. All of this when half of MCA's are sold on an "Introductory offer where we will see better rates and terms on consecutive deals".

Let me offer a brief example on a brand new program from one of my funders:

4M Initial BR: 1.14
4m Renewal BR: 1.16

Has this practice survived simply because no one has called BS on it yet? Will it continue to survive as this space gets more competitive and regulated?

I feel as though I must be missing something -- especially with the "Do right by your Merchant!" mentality of most of the major funders on this forum.

I apologize if this is an amateur question. However it seems to me the only reason you would "renew" the contract (as a funder) like this rather than "add-on" or "refinance" is purely out of the expectation for an even greater return (and if so, that's fine and is the only answer I need). I am not as familiar with the investment side of MCA and so I could be wrong but it seems to me there may be a less predatory way to offer this type of renewal without negatively affecting profitability and ROI requirements.