How to read a working capital quote: 7 things brokers don't always explain
A working capital quote sheet looks deceptively simple. Advance amount, factor rate, term, daily payment. Sign here. But the operational details that determine whether the deal works for your business are usually buried in the contract — not the quote sheet. Here are the seven I always walk clients through before they sign.
The seven details
1. Origination fees (taken out of the advance)
Many quotes show a "clean" advance amount and factor rate, but the lender takes 2–10% out of the advance as an origination or "doc" fee. Your $100K advance arrives in your bank as $94K — but you pay back the full $135K (the $35K cost is calculated on the original $100K, not the $94K you actually received). This effectively raises your true factor rate.
What to ask: "Is the advance amount on this quote what hits my bank account, or is there an origination/doc fee taken out?" If yes: "What's the all-in cost net of that fee?"
2. Daily vs weekly payment cadence
A daily ACH (252 business days/year) hits your operating account every weekday. A weekly ACH hits once a week. The total payback is the same, but the cash-flow impact is very different — daily payments are smoother but require maintained operating balance; weekly payments are easier to forecast but mean larger lump withdrawals.
Some lenders also offer revenue-share (% of daily deposits, true MCA structure) which scales payment with your revenue. This is the most flexible during a slow week but requires giving the lender a view into your daily revenue.
What to ask: "Is this fixed daily ACH, fixed weekly, or revenue-share? Can I switch cadences mid-term if cash flow shifts?"
3. Prepayment terms
For most working capital advances, the factor rate is the factor rate — paying off in 6 months instead of 12 doesn't reduce the cost (you still owe the full $135K on a $100K advance). Some lenders offer "early payoff discounts" of 10–25% off the remaining balance if you pay early. Others have NO such discount.
For term loans, prepayment usually saves substantial interest (because APR scales with time). But some term loans have prepayment penalties (1–3% of remaining balance) for the first 6–24 months.
What to ask: "What happens to my cost if I pay this off in 6 months instead of full term? Is there an early-payoff discount, or do I owe the same total amount?"
4. Stacking penalties
"Stacking" is taking a second working capital advance while a first is still active. Most lenders explicitly prohibit this in the contract — and the penalty for stacking is usually default acceleration (the full remaining balance becomes immediately due). Brokers don't always highlight this because they're being paid on the deal closing, not on you avoiding stacking later.
If you might need additional capital before this advance is paid off, ask the lender upfront whether they allow add-ons (some do) or whether you'd need to pay this one off before taking another (most). Knowing this changes the strategic decision about how much to borrow now.
What to ask: "Does the contract restrict me from taking other financing while this is outstanding? What's the penalty for doing so?"
5. ACH withdrawal controls
Working capital lenders typically require ACH access to your operating account. The contract specifies which account, the daily/weekly amount, and what happens if the ACH bounces (NSF fees + sometimes a default trigger).
What's less obvious: some lenders also require you to NOT change your operating bank account during the term of the advance, and some prohibit you from running revenue through a different account that the lender doesn't have ACH access to. Both are violations that can trigger default.
What to ask: "Can I switch my operating bank during the term? What ACH-related actions trigger default?"
6. Default acceleration
If you default (NSF, stacking, contract breach), the contract typically allows the lender to accelerate — i.e., the full remaining payback becomes immediately due and goes into collections. Some contracts also have a "confession of judgment" clause that lets the lender skip the lawsuit step and go straight to bank account levy in certain states (NY confessions of judgment have been restricted for out-of-state borrowers since 2019, but other state vehicles still exist).
You should always know exactly what triggers default and what happens after. A reasonable lender will explain these terms upfront. If your broker glosses over the default section, that's a yellow flag.
What to ask: "Walk me through the default section. What specifically triggers default? What happens immediately after?"
7. "True-up" clauses (revenue-share advances)
For true MCA (revenue-share) advances, the lender takes a % of daily revenue and the term length is variable — fast revenue means fast payback, slow revenue means longer payback. Some contracts include a "true-up" clause that allows the lender to adjust the % collected if your actual revenue meaningfully diverges from what was projected at origination.
True-ups can work in your favor (lower % if revenue is below projection) or against you (higher % if revenue spiked). The mechanism is usually fair but worth knowing exists, because a surprise true-up notice mid-term can mess with your cash flow planning.
What to ask: "Is this a fixed-payback or revenue-share advance? If revenue-share, are there true-up provisions?"
The two-page rule
Most reasonable working capital contracts can be summarized on a single page of plain English: amount, factor, term, payment cadence, fees, prepayment terms, stacking restrictions, default triggers. If a lender or broker can't (or won't) summarize the key terms in a paragraph or two over the phone, that's a strong signal to slow down.
A good broker will pre-summarize this for you. If you're working with a broker who isn't, asking for it explicitly is reasonable — and the answer (or lack of answer) tells you a lot about how they'll behave on the rest of the deal.
What I do with every quote I send
When I source a quote for a client, I send back a one-page summary in plain English: the seven items above plus the all-in cost in actual dollars and the effective APR. This isn't standard industry practice, but it should be — it's the minimum information you need to make an informed decision.
Send me the PDF and I'll send back the seven-item summary.