The arithmetic, step by step
First advance: $30,000 at 1.33. Total repayment $39,900. After four months of daily payments you have repaid $25,000 and owe $14,900.
The funder offers a $20,000 renewal at 1.25. The renewal is used first to retire the $14,900. You receive $5,100. You now owe $25,000 on the renewal.
What you paid for that $5,100: the new factor on $20,000 is $5,000 of cost, and $14,900 of that $20,000 was the old balance — which already had the first advance's fee built into it. You paid a fee to refinance the funder's own receivable, and the effective cost of the $5,100 of new money is close to the money itself.
The industry's critics call this the double dip and note that it is disclosed thinly or not at all. Some funders now credit back the unearned portion of the first fee at renewal, which changes the arithmetic entirely. The question to ask is exactly that: is the unearned fee on the old balance credited, or is the new factor charged on the whole amount?
When a renewal is still the right call
When the funder credits the unearned portion of the old fee, so you pay the new factor only on the new money. When the new factor is materially better than the old one and the term longer, so the daily payment falls. When the alternative is a second advance stacked on the first, which is worse than any renewal. And when the renewal is mostly paid down — a renewal at 80 percent repaid is a different thing from one at 40 percent.
What to ask before saying yes
How much of the new advance retires the old balance. How much reaches the account. The total repayment on the renewal. Whether any of the first advance's fee is credited back. The new daily or weekly payment against the old one. And what the same $5,100 would cost as a small standalone advance from a different funder — often less, and the comparison takes one phone call.