How a merchant cash advance works for Union City, TN card sellers: which sales an advance collects from, factor rates and holdbacks with invented figures, why the contract is a purchase and how paying early lowers the cost of a line but not the total collected on an advance.
At a glance
- Collected from
A share of daily card sales
- Priced by
A factor rate, not an annual rate
- Set by
The funding source, in its offer
Card Sales Alone: Which Takings a Merchant Cash Advance Draws On
An advance is collected from sales rather than billed as a fixed monthly amount, and only the card side of the till counts: checks, cash and transfers stay outside what it collects.
For a counter where most customers pay by card, that reaches most of the day's takings. For a business that bills some customers by check, an advance only reaches the card side. The merchant cash advance is the revenue-linked product on this site, and it is not a loan: the funding source buys a share of future card sales; the business loans overview lists the fixed-payment products beside it. Obion County, TN had 17 limited-service restaurants in 2023, per County Business Patterns, and ZIP Code Business Patterns placed 14 in ZIP 38261.
Factor Rates in MCA Pricing, and Why One Is Not an Annual Rate
The factor rate turns an advance into the total to be collected: advance times factor equals the total remitted. On an invented $16,500 advance at a factor of 1.24, the business remits $20,460.00, and the advance costs $3,960.00, or 24 cents for each dollar received.
That figure is fixed when the contract is signed. It does not grow with time and is not quoted per year, so 1.24 cannot be set beside a loan's 12% as if they measured the same thing. A shorter remittance period makes the same factor more expensive in annual terms.
Why a Merchant Cash Advance Contract Is Written as a Purchase of Card Sales
Not in the contract's own terms. An advance contract is written as a purchase: the funding source buys a share of future card receivables at a discount, with no interest rate or fixed end date. The daily amount rises and falls with sales.
That changes what the owner signs. A funding source may file a lien on business assets, ask the owner to sign personally or require that card sales run through one processor. Read those clauses before signing, since they shape what the business can do while the advance is open.
Holdback Percentages Worked Through a Union City, TN Pet Supply Store's Card Days
Holdback is the slice of each day's card sales, stated as a percentage, that is sent to the funding source. In an invented case, a pet supply store with a 9% holdback and $780 of card sales remits $70.20 that day. A $390 day the remittance falls to $35.10, and on a $1,150 day it rises to $103.50.
If that invented store took $7,500 at a factor of 1.26, it owes $9,450.00. At $70.20 a business day it would take 135 business days to remit, counting the last partial day as a full one. Slower days stretch that out; the total stays the same. County Business Patterns counted 8 other miscellaneous store retailers in Obion County, TN in 2023, the group pet supply stores belong to.
How to Work Out a Factor Rate From the Total an Offer Collects
Divide the total to be collected by the cash advanced, and the result is the factor. An invented offer of $12,000 with $16,080 to be remitted works out to a factor of 1.34:
- Find the total to be collected in the offer.
- Divide it by the cash the business actually receives after any fees.
- Subtract 1 from the result to see the cost per dollar: 0.34 here, or $4,080 on the invented $12,000.
- Estimate the remittance period from average daily card sales and the holdback, to see how soon that cost is paid.
If the offer subtracts a fee from the cash paid out, divide by the smaller net amount, which gives a higher true factor. The calculator on this page works out the total collected, the cost and the number of business days.
Merchant Cash Advance vs Line of Credit When the Money Comes Back Early
A line of credit charges interest on the balance for the days it is owed, so paying it back early lowers the cost. An advance charges its factor no matter how soon the money comes back.
In an invented comparison, a business needs $9,000. Drawn on a line at 12.5% and repaid in 60 days, it carries $184.93 of simple interest; repaid in 120 days, $369.86. Taken as an advance at a factor of 1.22, it costs $1,980.00 whether it is remitted in 60 days or 160. The line of credit page traces a draw from start to payoff. How the six products line up by cost, the advance included, is set out on the Union City, TN page. The industries page pairs the advance with steady card sales and a need for cash now.
By Larkwood Lenders · Updated
