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Net funding
Also called net proceeds, net disbursement, net advance, net wire.
The money that actually reaches the business account after origination fees, ACH and wire charges, broker compensation and payoffs of prior positions are deducted from the approved amount.
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
Approved amount and delivered amount are two different numbers, and the gap between them is where most of the surprise in a funding lives. Deductions taken at funding commonly include an origination or underwriting fee, an ACH or wire fee, a filing fee, and - on a renewal or consolidation - the payoff of whatever is being retired.
The important mechanical point is that cost is calculated on the gross. On a factor-rate advance, the purchased amount is the purchase price multiplied by the factor rate, and the purchase price is the figure before deductions. On an interest-bearing loan, interest generally accrues on the full principal advanced, including the portion that went straight back out as fees.
Every funder will provide the net figure in writing before closing. Asking for it is the single fastest way to see what an offer actually costs.
Where this one catches people
The quoted cost is a percentage of what you are charged, not of what you receive. Two offers with identical factor rates deliver very different amounts of usable cash once fees and payoffs come out, and the one with the lower rate and higher fees is frequently the worse deal. Compare net cash in against total dollars out, and ignore the rate.
Worked through
Illustration. Approved purchase price $100,000 at a factor rate of 1.35, so the purchased amount is $135,000. Deducted at funding: $4,000 origination, $150 wire, and a $34,000 payoff of an existing position.
Net funding is $61,850. The business owes $135,000. The cost of $35,000 was calculated on $100,000, but the usable new cash was $61,850 - and part of what the payoff retired was itself a fixed cost already fully incurred. Figures are illustrative.
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
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Net funding — common questions
What does net funding mean?
The money that actually reaches the business account after origination fees, ACH and wire charges, broker compensation and payoffs of prior positions are deducted from the approved amount.
Where does net funding catch people out?
The quoted cost is a percentage of what you are charged, not of what you receive. Two offers with identical factor rates deliver very different amounts of usable cash once fees and payoffs come out, and the one with the lower rate and higher fees is frequently the worse deal. Compare net cash in against total dollars out, and ignore the rate.
Is net funding the same as an interest rate?
Net funding 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 net funding apply to?
Merchant Cash Advance, Working Capital, Term Loan, Revenue-Based Financing.
Is there a worked example of net funding?
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 net funding?
Double dipping, Origination fee, Payoff letter, Purchase price, Purchased amount.
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.