When a merchant cash advance is collected as a share of card batches, it reaches only the sales that run through the card processor; cash in the register sits outside the holdback. For an Alice, TX general merchandise store, the card share of daily sales decides how many days the advance runs. The total collected does not change.
An invented $9,615 advance at a 1.31 factor and a 13% holdback is collected until $12,595.65 has been collected, a cost of $2,980.65. At an invented $2,415 of daily sales, a 70% card share ends it in 58 days and a 55% card share in 73 days. An offer may instead collect a fixed debit from the bank account, which the card share does not change.
Card batches and cash in the register: the sales a holdback can reach
A holdback is a percentage of card batches, taken as they settle through the processor named in the agreement. A sale paid in cash, by check or on a house account never passes through that processor, so a card-batch holdback cannot reach it.
That makes the card share of sales the number to know before an offer. A store where most customers pay by card sends a larger daily amount to the provider and finishes sooner; a store with more cash sales sends less each day and runs longer.
An offer may be set up differently: some advances collect a fixed amount from the bank account each business day or week instead of a share of card batches. That debit comes out of the account whatever mix of cash and card filled it.
County Business Patterns counted 13 establishments classed as all other general merchandise stores in Jim Wells County, TX in 2023, with $1.9 million of annual payroll between them. ZIP 78332 had 8 establishments in that class in the same year.
The same invented advance at a 70% and a 55% card share
Illustration only, invented figures: a general merchandise store takes an advance of $9,615 at a 1.31 factor, so $12,595.65 is to be collected, at a holdback of 13% of card batches. In this invented example, daily sales average $2,415.
| Card share of sales | Card sales a day | Cash sales a day | Collected a day at 13% | Days to collect $12,595.65 |
|---|---|---|---|---|
| 70% | $1,690.50 | $724.50 | $219.77 | 58 |
| 55% | $1,328.25 | $1,086.75 | $172.67 | 73 |
In this invented example, the lower card share adds 15 days of collection. In this invented example the store keeps more of each day's sales at 55%, $2,242.33 of the $2,415 against $2,195.23 at 70%, so the daily draw on the till is lighter while the advance runs longer.
The total collected stays put while the end date moves
In this invented example the cost is $2,980.65 at either card share: the factor fixes the total at $12,595.65 on the day the advance is signed. Only the calendar changes.
That cuts both ways for the store. A week of weaker card sales pushes the end date out but adds no cost. A strong week brings the end date in but lowers no cost either, and collecting the same dollars over fewer days makes the advance costlier per month of use.
A working capital loan works the other way round: the payment is fixed and the interest depends on the term. On a credit line, interest runs only on the dollars drawn and only while they stay out. Set the invented $2,980.65 against what either would cost for the same amount before choosing.
Records an Alice, TX store gathers before comparing advance offers
- Card processor statements for recent months, showing daily or monthly card batches.
- Bank statements for the same months, so cash and check deposits can be told apart from card settlements.
- Register reports that split sales by payment type: card, cash, check and house account.
- Any advance already being collected, with the amount still to be collected on it.
- The purpose of the money and the amount, ready to explain on the call.
With those in hand, each offer can be read for its factor, its holdback or fixed debit, the total to be collected and the days it would take at the store's own card share. The merchant cash advance page works through other invented advances, including two factors and two holdbacks.
By Southmoor Business Funding · Updated