Early Payoff Discount
A reduction in total payback that some funders offer if you repay your advance ahead of schedule.
An early payoff discount (sometimes a prepayment or early-repayment benefit) reduces your total payback if you retire the advance early. This matters because of how factor-rate pricing works: the cost is fixed at signing, not accrued daily, so paying a factor rate deal off early does not automatically save you money — unless the agreement specifically includes a discount for doing so.
Where a discount exists, it can be structured as a lower effective factor, a rebate of part of the remaining balance, or a set discount schedule. The details vary widely between funders, so it is something to ask about specifically rather than assume.
Two practical moves: first, ask whether an early payoff discount exists and get the exact terms in writing before signing; second, if you expect a large receivable or a strong season to let you pay down fast, that discount can change which offer is actually cheapest. Absent a discount, prepaying a fixed-cost advance mainly frees cash flow rather than lowering the price — which can still be worth it heading into a renewal.
Frequently asked
Does paying my advance off early always save money?
No. Because a factor rate fixes the cost at signing, early payoff only reduces total payback if your agreement includes an early payoff discount. Otherwise you pay the same total, just sooner.
How do I get an early payoff discount?
Ask before signing whether one is available and get the exact terms in writing. Not all funders offer it, and the structure varies.
Where do I find early payoff terms?
In your funding agreement, usually in the prepayment or payoff section. If it is not stated, assume there is no discount unless the funder confirms one in writing.
Related terms
The full dollar amount you repay over the life of an advance — funded amount times the factor rate, plus any fees.
A decimal multiplier (like 1.30) applied to the funded amount to calculate total payback — it is not an interest rate or APR.
Taking new capital from your existing funder — typically around 50% paid down — that pays off the current balance and adds funds on top.
The base factor rate an underwriting desk assigns to a deal before any broker markup — the wholesale cost of the advance.
A financing structure where a funder buys a set amount of your future sales at a discount today — a sale, not a loan.
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