Glossary · pricing

Double dipping

Also called renewal double dip, rolling the balance.

Refinancing an advance before it is paid off, so the old balance is rolled into a new and larger advance and the new factor rate is charged on top of fee the merchant has already agreed to pay.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

A fixed-cost advance charges its whole fee at signing. Fifty days into a schedule, the uncollected balance is not principal; it is a blend of unreturned funding and unearned fee. A renewal pays that balance off out of the new gross funding amount, and the new factor rate is applied to the entire gross, the balance included.

The result is a fee charged on a fee. It does not show up anywhere in the offer, because the offer is expressed as a factor rate against the gross amount and the gross amount is a real number. What is not real is the implication that the rate describes what the new cash costs.

Funders solicit renewals once a schedule is a certain distance along, and brokers earn commission on the gross again. The renewal is where a large share of this industry's revenue comes from, and it is the reason a business that took one advance frequently ends up with a bigger obligation every quarter while receiving less new money each time.

Where this one catches people

The pitch is more money, one payment, lower daily. Two of those are usually true. Price the renewal on net new cash against total new cost, not on the factor rate against the gross funding amount, and the arithmetic changes character completely. If the funder will not net out the payoff before quoting, that is the answer.

Worked through

An existing advance: $50,000 funded at 1.40, so $70,000 to remit. After $42,000 has been collected, $28,000 remains.

The renewal: $80,000 funded at 1.45, so $116,000 to remit. Of the $80,000, the funder keeps $28,000 to retire the old balance. Net new cash to the business: $52,000.

New cost: $36,000. Of that, $12,600 is charged on the $28,000 payoff, money the business never receives and had already agreed to pay once. Measured properly, $36,000 of cost against $52,000 of new cash is roughly 0.69 on the dollar, not the 0.45 the factor rate suggests.

Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.

Where you will meet this term

Merchant Cash Advance Working Capital Revenue-Based Financing

Read next

ConsolidationReplacing several outstanding advances or loans with one facility, which genuinely helps only if the old bala… Factor rateA multiplier applied to the funded amount that fixes the total dollars to be remitted. It is a price, not a r… Net fundingThe money that actually reaches the business account after origination fees, ACH and wire charges, broker com… Payoff letterThe funder's binding written statement of the exact amount required to retire an obligation, the date through… RenewalNew funding from the same funder while an existing advance is still outstanding, where the remaining balance … StackingTaking an additional advance or loan while an existing one is outstanding, so two or more fixed debits run ag…

Double dipping — common questions

What does double dipping mean?

Refinancing an advance before it is paid off, so the old balance is rolled into a new and larger advance and the new factor rate is charged on top of fee the merchant has already agreed to pay.

Where does double dipping catch people out?

The pitch is more money, one payment, lower daily. Two of those are usually true. Price the renewal on net new cash against total new cost, not on the factor rate against the gross funding amount, and the arithmetic changes character completely. If the funder will not net out the payoff before quoting, that is the answer.

Is double dipping the same as an interest rate?

Double dipping is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does double dipping apply to?

Merchant Cash Advance, Working Capital, Revenue-Based Financing.

Is there a worked example of double dipping?

Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.

What else should I read alongside double dipping?

Consolidation, Factor rate, Net funding, Payoff letter, Renewal.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.