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Buyout vs. Renewal Calculator

Compare the economics of renewing with the current funder versus buying out to a new funder.

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Buyout vs. Renewal: Which Is Better?

When a merchant nears renewal eligibility, the broker faces a choice: renew with the current funder (simpler, faster, lower commission) or buy out the remaining balance with a new funder (more complex, potentially better terms for the merchant, higher commission). A buyout involves a new funder advancing enough capital to pay off the existing RTR balance plus provide additional working capital. The merchant gets a fresh start with one position. The broker earns new-deal commission rates (higher than renewal rates). However, the merchant's total cost may be higher because the buyout amount includes the payoff, which is re-factored at the new rate. This calculator compares both paths on net new capital to the merchant, total cost, and broker commission so you can make the right recommendation.

How to Use This Calculator

Enter the current position details

The remaining RTR is the amount owed to the current funder. In a buyout, this amount must be paid off from the new advance.

Enter both options

Buyout: total amount from the new funder (RTR payoff + new capital). Renewal: amount offered by the current funder (all new capital, no payoff needed). Enter the factor rate for the new deal.

Compare the outcomes

Net new capital shows how much additional cash the merchant actually receives under each option. The commission comparison shows which option pays you more. The cost comparison shows which is cheaper for the merchant.

Key Concepts

Buyout

A new funder pays off the remaining balance with the existing funder and provides additional capital. The merchant switches from one funder/position to another. Treated as a new deal for commission purposes.

Net New Capital

The amount the merchant actually receives in their bank account after the existing balance is paid off. On a $120K buyout with $25K payoff, net new capital is $95K.

Double-Dipping Cost

In a buyout, the $25K payoff is re-factored at the new rate. The merchant effectively pays the factor rate on capital that paid off old debt, not new business investment. This is the hidden cost of buyouts versus renewals.

Expert Insights

When Buyouts Win: Buyouts make sense when the new funder offers a significantly lower factor rate (5+ points better), the current funder will not offer renewal terms, or the merchant wants to consolidate multiple positions into one. The lower rate on the full amount can offset the double-dipping cost. Always run the numbers -- do not assume one path is better without calculating.

When Renewals Win: Renewals win when the current funder offers competitive rates, the remaining balance is small relative to the new advance, and speed matters (renewals close faster than buyouts). Renewals also preserve the merchant's relationship with a proven funder, which has value for future deals. The lower commission on renewals is offset by zero customer acquisition cost.

Frequently Asked Questions

Buyouts pay new-deal commission rates (8-12%) on the full amount including the payoff. Renewals typically pay lower rates (5-8%) on the new capital only. On a $120K buyout at 10%, you earn $12,000. On a $100K renewal at 7%, you earn $7,000. The $5,000 difference is significant, but make sure the buyout is also better for the merchant.

Yes. When the new funder wires the payoff, the current funder sees it. Some funders have non-solicitation clauses that restrict other funders from poaching their merchants. However, these clauses bind funders, not brokers. Check your agreements to understand any restrictions.

Yes. If the remaining balance is large relative to the new advance, most of the "new" funding goes to pay off old debt rather than provide fresh capital. And the payoff amount gets re-factored, increasing total cost. Always show the merchant the net new capital number -- this is the real test of whether the buyout delivers value.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.