MCA syndication is investing alongside a funder in individual merchant cash advances. The syndicate puts up a percentage of the advance and receives that same percentage of everything collected, minus the funder's fees. If the deal defaults, the syndicate absorbs the same percentage of the loss.
How a syndicated deal works
A funder originates a $100,000 advance at a 1.35 factor rate, so $135,000 is owed back. A syndicate taking 10% funds $10,000 and is entitled to 10% of every payment collected, up to $13,500.
The merchant pays daily or weekly. Each payment is split by participation percentage, with the funder's management fee deducted first.
Fees a syndicate typically pays
- Upfront commission when the deal is funded, covering broker and origination costs.
- A management fee on each collection, usually a percentage of the payment.
- Occasional legal or collection costs on deals that stop paying.
Why syndication returns vary so much
Two investors in the same funder can see very different results depending on which deals they accepted, how fast their cash was redeployed, and how many deals defaulted. A single write-off can erase the profit from several completed deals, which is why deal-level tracking matters more than a headline factor rate.
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