MCA payoff letter explained
An MCA payoff letter is the funder's official word on exactly what it takes to clear an advance. Here is what should be in it, how to read it, and why you should never wire a payoff without one.
This article is educational and is not an offer of credit.
Key takeaways
- A payoff letter is the funder's written statement of the exact amount and date to clear an advance.
- It is not the same as your remaining balance estimate, because the funder controls the official figure.
- Always check the good-through date, since a payoff figure is only valid for a set window.
- Watch for fees and read whether the payoff fully releases any UCC lien on your business.
- This is general information, not legal advice. Have a qualified attorney review the terms if anything is unclear.
What an MCA payoff letter is
A payoff letter, sometimes called a payoff statement or a payoff quote, is a document from your funder stating the exact dollar amount required to fully resolve an advance and the date through which that figure is valid. It is the official number, the one you actually pay, as opposed to an estimate you ran on your own.
It matters because a merchant cash advance is the purchase of your future receivables, priced with a factor rate, not a loan that accrues interest. That means the amount left to clear is not simply your original cash advance minus what has been collected. It is what remains of the total purchased amount, and only the funder can confirm precisely how they are accounting for it. The payoff letter removes the guesswork and puts a firm number on paper.
Why you should always request one in writing
Never wire a payoff based on a number a representative reads to you over the phone, and never rely on your own math alone. A spoken figure can be wrong or incomplete, and if you send the wrong amount you can end up still owing a balance, or chasing a refund you overpaid.
A written payoff letter protects you. It is the document you act on, the record of what was owed on a specific date, and your proof of what you agreed to pay. If a funder is reluctant to put the payoff in writing, treat that as a reason to slow down, not speed up.
To know roughly what to expect before you request the letter, estimate your remaining balance with the MCA payoff calculator. Walking in with a ballpark figure makes it easy to spot a payoff letter that looks off and worth questioning.
What a payoff letter should contain
A complete payoff letter should clearly state each of these. If any are missing, ask before you pay:
- The exact payoff amount, in dollars, to fully resolve the advance.
- A good-through or expiration date, the deadline by which that amount is valid.
- How payment must be sent, such as wire or ACH, with the receiving account details.
- Any fees included in or added to the figure, itemized rather than buried.
- A statement of what happens once paid, including release of any UCC lien and confirmation the obligation is satisfied.
- The advance or account number it applies to, so there is no ambiguity about which obligation is being cleared.
The good-through date, and why it matters
Read the good-through date first. Because remittances are still being collected daily or weekly until you pay, and because some funders factor in timing, a payoff figure is only valid for a set window, often a handful of business days.
If you pay after the date passes, the amount can change and you may come up short. So once you have a payoff letter, line up your funds and send the exact amount well before the deadline. If you cannot pay in time, ask for an updated letter with a fresh figure and a new date rather than guessing at the difference.
Reading the fine print: fees and lien release
Two things deserve a careful read. First, fees. Check whether the payoff includes any additional charges beyond the remaining balance, and ask for anything unexplained to be itemized so you know exactly what you are paying for.
Second, and just as important, the lien. Many MCA agreements are secured by a UCC filing against your business. A proper payoff should result in that lien being released, because a lingering UCC filing can complicate future funding even after the advance is paid. Look for language confirming the filing will be terminated once you pay, and follow up to confirm it actually was. If the letter is silent on the lien, or anything about the terms is unclear, this is general information and not legal advice, so have a qualified attorney review it before you send money.
After you pay: confirm and document
Clearing the advance is not finished the moment the funds leave your account. Close it out cleanly:
- Get written confirmation from the funder that the advance is paid in full and satisfied.
- Confirm the UCC lien has been terminated, and keep the filing record.
- Keep the payoff letter, your payment record, and the satisfaction confirmation together for your files.
- Verify the daily or weekly remittances have actually stopped on your next bank statement.
Funding the payoff and getting started
Once you have a clean payoff letter, the question is how to fund it without leaving the business cash-poor. Paying from cash is simplest, but replacing the advance with lower-cost capital can clear the balance while protecting your working cash. A business line of credit or, for qualified borrowers, an SBA 7(a) loan can pay off the advance and convert fast daily debits into a more manageable payment. If you carry several advances, size the full load first with the stacked advance calculator and see whether traditional consolidation fits. Just remember a lower payment is not always a lower total cost, so check both.
Talk to a specialist about consolidation and relief if you want help funding a payoff. There is no credit pull to start, you will get a straight answer about what is realistic, and you can see your options or call 866-625-4413.