Running an MCA shop or broker desk means juggling compliance rules, moving parts, and a lot of jargon. Whether you’re a seasoned funder, a brand‑new ISO, or a merchant trying to decode your contract, bookmarking a clear glossary of MCA terms saves hours and prevents expensive misunderstandings.
Below you’ll find the 150 most commonly used words, acronyms, and concepts in the merchant‑cash‑advance world—explained in plain English. The list is alphabetized so you can skim, search (⌘/Ctrl + F), or link colleagues directly to a definition. Every entry is evergreen, but when regulations shift we update the wording and examples inside LendSaaS’s built‑in knowledge base.
A
ACH – Automated electronic network that moves funds between bank accounts; most MCA remittances are collected via daily ACH debits.
Advance – The lump‑sum capital a funder purchases from a merchant’s future receivables—often confused with a loan.
Adverse Action Notice – Disclosure required when credit is denied or pricing is materially worse than originally quoted.
Affiliate Broker – ISO or sub‑agent that refers deals under another broker’s umbrella and shares the commission.
APR (Annual Percentage Rate) – Standardized yearly cost of capital expressed as a percentage—including all fees and charges.
Application – Initial data packet submitted by a merchant: identity, revenue documents, and requested funding amount.
Assignment – Legal transfer of rights in future receivables or security interest to the funder or a third party.
B
Balance Sheet – Financial statement summarizing a company’s assets, liabilities, and equity at a specific date.
Bank Statement Analysis – Underwriting technique reviewing three to six months of deposits, withdrawals, chargebacks, and average balances.
Batch Funding – Operational process of disbursing multiple advances in a single wire or ACH file each afternoon.
Blanket Lien – UCC filing that secures all present and future assets of a merchant—not just receivables.
Broker – Middleman who originates deals and earns a fee but does not fund with their own capital.
Broker Fee – Compensation paid to an ISO or broker, typically a percentage of funded amount or payback.
C
Cash Flow – Net amount of cash moving in and out of a business; critical measure of repayment capacity.
Chargeback – When a merchant disputes a card transaction, reducing gross sales and triggering risk alerts.
Collateral – Assets pledged to secure an obligation or to serve as additional recourse for a funder.
Compliance – Ongoing adherence to laws, regulations, and self‑imposed policies governing MCA origination and servicing.
Confession of Judgment (COJ) – Legal document allowing immediate judgment upon default without trial; restricted or banned in many states.
Cost of Capital – Total expense of obtaining funds, including factor rate, fees, and ancillary charges.
Credit Pull – Soft or hard inquiry of personal or business credit bureaus for underwriting purposes.
Cross‑Default – Clause stating default on one obligation triggers default on others held by the same funder.
D
Daily Debit – Automated withdrawal of a fixed or variable amount from the merchant’s bank account each business day.
Default – Failure to meet contractual obligations, usually missed payments or breach of covenants.
Delinquency – Time period during which a payment is past due but before the advance is charged off.
Disclosure Statement – Plain‑language summary of costs and terms required under state MCA transparency laws.
Discount Rate – Difference between the funded amount and total payback, often expressed as a decimal factor.
Due Diligence – Comprehensive verification of a merchant’s financials, ownership, and risk profile prior to funding.
E
Early Payoff – When a merchant satisfies the remaining balance ahead of schedule, sometimes triggering a discount or fee.
Effective Rate – Actual annualized cost of the advance once remittance frequency and term are considered.
Electronic Signature – Legally binding e‑signature captured on contracts, replacing wet ink in digital workflows.
Escrow – Third‑party account holding funds until contractual conditions are met, e.g., pending UCC release.
Exposure Limit – Maximum dollar amount a funder is willing to commit across a single merchant or industry.
Extension – Agreed change to payment schedule that lengthens the time to collect the outstanding balance.
F
Factor Rate – Decimal (e.g., 1.35) multiplied by funded amount to calculate total payback obligation.
Fee Schedule – Table of processing, origination, NSF, or late fees disclosed to the merchant and broker.
FICO Score – Consumer credit score range 300‑850 used to gauge personal repayment history of business owners.
First Position – Advance with priority remittance rights, collecting before any other MCA or loan obligations.
Fixed Payback – Structure where total repayment amount never changes, regardless of actual sales performance.
Float Days – Gap between card settlement and deposit that affects daily average balances and risk models.
Funding Agreement – Executed contract package detailing purchase price, receivables assignment, fees, and repayment mechanics.
G
Garnishment – Court‑ordered withholding of earnings or bank funds to satisfy a judgment—risk if merchant loses suit.
Guarantee – Promise by third party or owner to fulfill obligations if the merchant cannot.
Guarantor – Individual or entity providing the guarantee; often the business owner in small MCA deals.
Guideline Matrix – Internal underwriting cheat‑sheet outlining maximum funding multiples by industry, FICO, and time‑in‑business.
H
Hard Credit Pull – Full bureau inquiry that impacts consumer credit score; typically performed just before funding.
Holdback Percentage – Portion of card or ACH receipts withheld daily to satisfy payback; synonym for split or remit rate.
Holiday Schedule – Calendar of non‑banking days when ACH debits and support operations are paused.
Hybrid MCA – Structure mixing fixed daily ACH debits with percentage‑based card splits to smooth cash flow.
Hypothecation – Pledge of collateral without transfer of title, used in syndication or leverage facilities.
I
Indemnification – Agreement to reimburse another party for losses or claims—common in ISO and servicing contracts.
Independent Sales Organization (ISO) – External broker entity that sources merchants in exchange for commissions.
Installment – Set periodic payment that covers both principal and fees—contrasts with revenue‑percentage remittance.
Intercreditor Agreement – Contract defining rights between multiple funders holding security interests in the same merchant.
Invoice Factoring – Financing method purchasing specific invoices, often confused with MCA but legally distinct.
Internal Rate of Return (IRR) – Discounted cash‑flow metric investors use to evaluate portfolio profitability over time.
ISO Agreement – Master contract outlining territory, commission splits, marketing rules, and compliance obligations for a broker.
J
Judgment – Court decision establishing liability; judgments can lead to bank levies or asset seizure.
Junior Position – Subordinate advance collecting after senior (first‑position) obligations are satisfied each day.
Jurisdiction – Legal authority governing the contract; determines which courts hear disputes.
K
Key Performance Indicator (KPI) – Measurable metric—like average funding time—used to track operational efficiency.
KYC (Know Your Customer) – Regulatory process verifying identity to prevent fraud and money‑laundering.
K‑Score – Internal composite risk score blending credit, cash flow, and industry data.
L
Lender of Record – Entity listed in documents as the purchasing party of receivables, even if syndicating risk.
Lien – Legal claim on assets to secure debt or future receivables purchase.
Line of Credit – Revolving financing option compared against MCA in merchant decision matrices.
Liquidity – Ready cash or equivalent assets available to meet short‑term obligations.
Lockbox – Bank account controlled by funder where all card receipts are swept daily before disbursement to merchant.
Lookback Period – Historical timeframe (e.g., last 90 days) analyzed to forecast sales and seasonality.
Loss Given Default (LGD) – Percentage of exposure not recovered after charge‑off.
M
MCA (Merchant Cash Advance) – Sale of a fixed dollar amount of future receivables in exchange for immediate capital.
MCA Terms – Collective reference to key contractual details—factor rate, holdback, term—explained throughout this glossary.
Margin – Gross profit a funder earns between funding cost and total receivable purchased.
Master Services Agreement (MSA) – Umbrella contract governing ongoing services between funder and ISO or technology vendor.
Merchant – Business selling a portion of future receivables to obtain working capital.
Merchant Agreement – Primary contract documenting receivables purchase and repayment obligations.
Micro‑Funding – Advances under roughly $10k, often digitally underwritten and funded same‑day.
Monthly Remittance – Repayment structure that debits once per month instead of daily or weekly.
N
Net Funding – Amount wired to merchant after subtracting origination and broker fees from purchase price.
Non‑Sufficient Funds (NSF) – Bank return code indicating account lacked funds for scheduled debit.
Notice of Assignment – Letter to card processor instructing redirection of splits to funder‑controlled account.
Notional Balance – Calculated remaining balance for revenue‑split arrangements where payments fluctuate.
Novation – Replacement of one contractual party by another with consent of all involved.
NSF Fee – Penalty charged when a scheduled debit is returned NSF.
O
Obligor – Party legally responsible for fulfilling payment or performance obligations.
Onboarding – Process of collecting documents, verifying identity, and setting up debit instructions pre‑funding.
Origination Fee – Upfront charge covering underwriting and processing; usually deducted from funding proceeds.
Overadvance – Funding amount exceeding what guidelines would normally permit based on risk metrics.
Overnight Deposit – Wire or ACH sent after bank cutoff, settling at start of next business day.
P
Payment Processing – Handling of credit‑card or ACH transactions through a merchant account provider.
Payback Amount – Total dollars merchant must remit to satisfy the purchased receivable.
Payoff Letter – Formal statement of remaining balance as of a certain date.
Per Diem – Daily interest or fee accrual used when calculating payoff through a specific date.
Personal Guarantee – Owner’s promise to repay if the business cannot fulfill obligations.
Placement Fee – Origination compensation paid by funder to broker—distinct from broker fee charged to merchant.
Portfolio – Aggregate pool of active and repaid advances held by a funder or investor.
Pre‑Qualification – Preliminary screening that estimates eligibility before full underwriting.
Principal – Portion of remittance applied to funded amount versus fees.
Purchase of Future Receivables – Legal characterization distinguishing MCA from a loan in many jurisdictions.
Q
Qualified Lead – Prospect meeting pre‑set criteria such as industry, revenue, and time‑in‑business.
Quick Pay Discount – Reduced payoff amount offered for satisfying balance within an early timeframe.
Quota – Monthly target of funded volume assigned to internal sales teams or ISOs.
R
Recurring Revenue – Predictable ongoing income stream that improves underwriting confidence.
Remittance – Payment transferred from merchant to funder under the agreed schedule.
Renewal – Subsequent advance issued to a merchant with existing payment history, often at lower cost.
Residual – Ongoing commission percentage paid to ISO from future collections.
Reserve Account – Funds withheld to cover potential chargebacks, fees, or default losses.
Reverse Consolidation – Product that injects capital daily to cover multiple existing debits, simplifying merchant cash flow.
Risk Grade – Alphabetic or numeric score representing overall probability of default.
Rolling Reserve – Percentage of sales held temporarily by processor to mitigate future disputes or returns.
S
Sales Volume – Total dollar amount of merchant transactions during a set period.
Secondary Market – Platform where funded advances are sold to other investors post‑origination.
Security Agreement – Document granting a security interest in collateral beyond purchased receivables.
Servicing – Day‑to‑day collection, monitoring, and customer support of funded advances.
Settlement – Legal resolution of dispute or discounted payoff, usually after default.
Situs State – State whose laws govern the contract and UCC filings.
Stipulations – Additional documents or actions a merchant must complete before funding (e.g., landlord waiver).
Subordination Agreement – Contract where senior lienholder allows junior funding to proceed by postponing its priority.
Syndication – Multiple investors purchasing fractional shares of a single advance.
Sole Proprietor – Unincorporated business owned by one individual, treated as personal credit for underwriting.
T
Termination Clause – Provision detailing circumstances under which contract can be ended before full performance.
Term Loan – Traditional loan with fixed interest and amortizing payments—common comparison product to MCA.
Third‑Party Processor – External payment company handling merchant transactions and splits.
Throughput – Total volume processed through merchant account each month.
Time in Business (TIB) – Number of months since legal formation; key eligibility metric.
Total Cost of Capital – Comprehensive expense measure combining fees and factor rate, similar to effective APR.
True‑Up – Periodic adjustment when remittances deviate from agreed percentage of actual sales.
Turn‑Down – Application that does not meet guidelines and is declined or referred elsewhere.
U
UCC (Uniform Commercial Code) – Set of laws governing secured transactions; Article 9 covers receivables purchase filings.
UCC Filing – Public notice (Form UCC‑1) perfecting a funder’s security interest in merchant assets.
UCC Search – Database query to confirm existing liens before funding a merchant.
Underwriter – Analyst who evaluates risk and decides whether to approve, decline, or counteroffer.
Underwriting Guidelines – Documented criteria defining acceptable industries, scores, and deal structures.
Unfunded Approval – Deal that was approved but never funded due to merchant withdrawal or unmet stips.
Unsecured – Advance or loan granted without collateral beyond the purchased receivables.
V
Verification Call – Recorded phone call confirming merchant identity and acceptance of contract terms.
Volume Cap – Maximum monthly processing volume allowed under a payment‑processing agreement.
Voluntary Settlement – Workout arrangement initiated by merchant to repay at discounted amount.
Vulnerability Scan – Security test ensuring payment systems meet PCI and bank compliance.
W
W9 Form – IRS form collecting taxpayer identification for 1099 reporting to ISOs and vendors.
Weekly Debit – Repayment schedule pulling funds once per week instead of daily.
Wire Transfer – Immediate bank‑to‑bank transfer used for same‑day funding of larger advances.
Working Capital – Short‑term cash used to cover operating expenses, payroll, or inventory.
Write‑Off – Accounting action marking uncollectible balance as loss after exhaustive collection efforts.
X
X‑Mod (Experience Modification Rate) – Workers’ comp risk factor sometimes reviewed for merchants in high‑injury industries.
XML Feed – Structured data export allowing real‑time portfolio stats to sync with investors.
Y
Yield – Return generated on deployed capital, expressed annually or over portfolio life.
Yield Spread – Difference between portfolio yield and cost of funds or benchmark rate.
Year‑End Statement – Summary of total collections, fees, and balances provided to merchants and investors.
Z
Zero Balance Account – Bank account automatically sweeping funds to master account, reducing fraud risk.
Zone Score – Geographic risk metric based on local economic indicators and fraud rates.
Keep This Glossary Handy
The next time an ISO emails about a reverse consolidation or your compliance team flags a new UCC filing, you can jump straight to the right definition instead of scouring Google. Better yet, many of these MCA terms are already mapped to data fields inside LendSaaS—so your team can stop translating spreadsheets and start funding faster.Ready to see how LendSaaS automates underwriting, compliance, and servicing? Book a live demo or spin up a free sandbox account today.
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