Merchant Cash Advance Lingo

Factoring Service Provider

A business that purchases account receivable loans from another business.

Cash Advance Provider

A business that purchases future sales of another business in exchange for a cash payment. Often the future sales are based on the amount the merchant processes in credit card charges on a monthly basis. The provider can be a large bank or small business that specializes in this type of financial product.

APR (Annual Percentage Rate)

A finance charge expressed as an annual rate, A nominal APR is simply the interest charged for the year. An effective APR includes all associated fees for the loan plus compound interest calculated for the year.

Split Funding

Also called "Batch Funding." The borrower's credit card processor automatically pays the daily sales percentage directly to the MCA company.

Lock Box

Also called "Escrow Payment" or "Trust Bank Account Withholding." The credit card processor deposits daily receipts in an escrow account as an Automated Clearing House (ACH) transaction. Once the cash advance provider receives its percentage of funds, the balance is released to the borrower.

Trust Bank Account Withholding

Also called "Lock Box" or "Escrow Payment." The credit card processor deposits daily receipts in an escrow account as an Automated Clearing House (ACH) transaction. Once the cash advance provider receives its percentage of funds, the balance is released to the borrower.

Escrow Payment

Also called "Lock Box" or "Trust Bank Account Withholding." The credit card processor deposits daily receipts in an escrow account as an Automated Clearing House (ACH) transaction. Once the cash advance provider receives its percentage of funds, the balance is released to the borrower.

Batch Funding

Also called "Split Funding." The borrower's credit card processor automatically pays the daily sales percentage directly to the MCA company.

ACH (Automated Clearing House)

An electronic financial network that processes large batch volumes of credit and debit transactions. Examples include direct deposit payroll and consumer loan direct debit payments.

ACH Withholding

Another term for "debit payments" where the MCA provider receives credit processing information and deducts its daily percentage directly from the business checking account via ACH.(Automated Clearing House)

MCA

Merchant Cash Advance company. The provider of the cash advance.

Safe Retrieval Percentage

Refers to the daily retrieval rate as a percentage, which is the portion of daily sales that are "safe" to use for daily repayment without hurting the business cash flow need. This percentage varies from merchant to merchant depending on the volume of credit card sales and the advance amount.

Factor Rate

Refers to the percentage of the advance amount that the provider charges to provide the advance. The factor rate is usually between 15-35% of the total cash advance. This rate varies depending on credit history, business revenue amounts, and the risk the cash advance company is taking in advancing the merchant.

Merchant Cash Advance

Sometimes called a business cash advance or a business cash advance loan, this is a financial transaction where a merchant "sells" a portion of future receivables in exchange for a large cash payment. Payment amounts, repayment terms, and repayment amounts vary depending on the agreement the merchant reaches with the advance provider.

Business Cash Advance

Sometimes called a merchant cash advance or business cash advance loan, this is a financial transaction where a business "sells" a portion of future sales in exchange for a large cash payment. Payment amount, repayment terms, and repayment amounts vary depending on the agreement reached with the advance provider.

Debit Payment

The MCA provider receives credit card processing information and deducts its daily percentage directly from the borrower's checking account via ACH. Also called "ACH Withholding."

Advance Amount

The amount of money given to a business up front in exchange for a percentage of future revenues.

Daily Retrieval Rate

The dollar amount a provider collects from daily credit card revenue.

Ceiling Rate

The percentage of gross sales the MCA provider will advance. The industry standard is a ceiling rate of no more than 10%. So, if a company has $100,00 in gross revenues, the maximum the MCA will advance is 10,000.

Factoring Fee

The percentage that a factoring company charges for collecting on a purchased invoice.