A merchant cash advance is not a loan: a funder buys a fixed amount of a business's future receipts for a lump sum and collects it through a holdback on sales or fixed debits. Glenford Financial, a small-business funding broker in San Angelo, TX, helps owners read the purchased amount, remittance and default terms, and compares advances with loan options; funders set all terms.
| What it is | A sale of future receipts to a funder; not a loan |
|---|---|
| How it is collected | A holdback on sales or fixed daily or weekly debits |
| Cost to compare | The total purchased amount against the cash you receive |
| Common in the agreement | Personal guarantee, UCC filing, no-stacking clause |
| Who sets terms | The funder, not Glenford Financial |
| Office | 15 W Beauregard Ave, San Angelo, TX 76903 · (325) 241-0824 |
An advance buys receipts; it is not a loan
A merchant cash advance is not a loan. The funder pays your business a lump sum, called the purchase price, and in return buys a larger, fixed amount of your future receipts, called the purchased amount. It collects that amount over time, either by taking an agreed share of each day's card sales or deposits or by debiting a fixed amount from your bank account. Collection, also called remittance, continues until the full purchased amount has been received.
Because the funder is buying receipts rather than lending, the agreement is written differently from a loan: there is usually no interest rate and no fixed end date, and the cost is set by the gap between what you receive and what the funder collects.
Three numbers on every offer
- Purchase price. The cash your business receives.
- Purchased amount. The total the funder will collect. The difference between the two is the cost of the advance in dollars.
- Remittance. How the funder collects: a holdback percentage of receipts, or a fixed daily or weekly debit.
Dividing the purchased amount by the purchase price gives the factor rate printed on many offers. A factor rate is not an interest rate and cannot be compared with one directly, because it does not reflect how quickly the amount is collected. The MCA revenue coverage calculator shows what the remittance takes from your sales each day.
What is a holdback percentage?
The holdback is the share of each day's receipts the funder takes until the purchased amount is collected. With a true holdback, collection rises and falls with sales: a slow week means smaller remittances and a longer collection period. Many advances instead use a fixed daily or weekly debit, set as an estimate of what the holdback would produce. A fixed debit does not shrink on its own when sales drop, which is why the reconciliation clause matters.
Reconciliation when sales slow
Many agreements give the business the right to ask for a reconciliation: if actual receipts were lower than the fixed debit assumed, the funder adjusts the debits to match the agreed percentage. Read how to request one, what records the funder wants, and how quickly it must respond. If an agreement has fixed debits and no meaningful way to adjust them, ask the funder why, and compare it carefully with a loan.
Credit checks and credit reporting
Practices vary by funder. Many check business and personal credit when you apply, and some do not report regular remittances to credit bureaus, so an advance may not help build business credit. A default can still surface, for example through collection activity or a court judgment. Put both questions to the funder before signing.
Stacking and the no-stacking clause
Stacking means taking a second advance, or other short-term funding, while the first is still being collected. Each funder then takes its own share of the same receipts, and the combined remittances can consume most of a day's sales. Many agreements forbid it and treat it as a default. If you already have an advance, say so to any new funder or lender, and add up every daily and weekly debit before accepting another.
Default: what the agreement can trigger
Agreements list the events that count as a default, which commonly include blocking the funder's debits, changing bank accounts or card processors without consent, taking another advance in breach of a no-stacking clause, or closing the business. Consequences written into agreements can include demanding the remaining purchased amount at once, enforcing a personal guarantee, acting on a UCC filing against business assets, and legal action. Read this section before you sign, not after a slow month.
Before accepting an advance, compare it
Advances are offered mostly to businesses with steady card or deposit volume. In Tom Green County that describes many of the 416 retail and 323 accommodation and food services employer establishments counted in 2023 (U.S. Census Bureau, County Business Patterns 2023). Before accepting, compare the dollar cost of the advance with the total payments on working capital financing or the interest on a line of credit drawn for the same need. If the advance still makes sense, make sure your sales can carry the remittance with room to spare.
How Glenford Financial handles advance requests
We explain the terms, compare an advance with the loan options a partner might consider, and only then, if you choose, send the request to funders that offer advances. A merchant cash advance is not a loan, and the funder alone sets the purchase price, purchased amount and remittance. The broker disclosures describe the relationship, and the common questions page covers more.
By Glenford Financial · Updated