Cloverland Credit passes the request on to funding partners, who decide.
A merchant cash advance is a sum paid up front and collected as a share of future card sales; it is not a loan. This page works through the cost of renewing mid-term, a restaurant offer line by line, a dental office's lab bills, a holdback on heavy and light days, finding the factor from an offer sheet, and the card statements to gather.
At a glance
- What it is
A purchase of future card sales, not a loan
- How it is collected
A fixed percentage of each day's card sales
- Who decides
The provider reviewing the request
Planning a stock order in Scott County, KY? What does renewing a merchant cash advance mid-term cost?
A provider may offer a new, larger advance before the first one is fully collected. The new advance first settles what is left on the old one, so the cash that reaches the business is smaller than the headline amount, while the new factor applies to the full new sum.
| Step | Invented figure |
|---|---|
| First advance and factor | $20,000 at a 1.30 factor, $26,000.00 to collect |
| Collected when the renewal is offered (60%) | $15,600.00 |
| Still owed on the first advance | $10,400.00 |
| New advance and factor | $24,000 advance; 1.29 factor; $30,960.00 due to the provider |
| Cash that reaches the shop | $13,600.00 |
| Cost of the new advance | $6,960.00 |
In this invented case the shop pays $6,960.00 for $13,600.00 of fresh cash, a cost equal to 51.2% of the money it actually receives (our arithmetic), and the invented agreement gives no discount on the first balance. Laying the renewal out this way shows its price before signing.
What is a factor rate in an MCA? A Georgetown, KY sit-down restaurant's offer, line by line
Multiply the advance by the factor and the result is everything the provider will collect. An invented 1.36 factor on an advance means $1.36 is collected for every dollar received. Unlike an annual rate, the factor does not change with time: the total stays the same whether collection takes three months or eight.
| Offer line | Invented figure | What it means |
|---|---|---|
| Advance | $32,000 | Cash paid to the restaurant |
| Factor | 1.36 | Multiplier on the advance |
| Total to collect | $43,520.00 | Advance times factor |
| Holdback | 12% of card sales | Share taken from each day's card sales |
| Average daily card sales | $3,150 | The restaurant's own invented figure |
| Taken per day at that average | $378.00 | Holdback times daily sales |
| Business days to collect | 116 | Total divided by the daily amount, rounded up |
So this invented advance costs the restaurant $11,520.00 (our arithmetic).
Lab bills at a Georgetown, KY dental office: how an advance is collected from card sales
An advance is collected, not paid in installments: the provider takes its percentage from card sales each business day, so the amount moves with the till. On a loan, by contrast, the installment is fixed whatever the day brings. That is the practical sense in which an advance is not a loan.
Invented example: a Georgetown, KY dental office takes an $11,500 advance to clear lab bills, at a 1.27 factor, so $14,605.00 is to be collected. With an invented holdback of 10% and invented card sales of $1,850 a day, $185.00 is taken daily and collection runs 79 business days (our arithmetic, rounded up as the calculator on this page does).
Scott County, KY counted 148 health care and social assistance establishments in 2023, more than any other sector by establishment count (County Business Patterns).
Holdback percentage on a heavy day and a light day at a Scott County, KY auto repair shop
Each business day the provider keeps its holdback, a fixed percentage of that day's card takings. Because it is a percentage, a heavy day sends more to the provider and a light day sends less, while the total to collect stays fixed.
Invented example: a Scott County, KY auto repair shop takes an $18,000 advance at a 1.31 factor, so $23,580.00 is to be collected at a 9% holdback. An invented $3,100 card day sends $279.00; an invented $1,400 day sends $126.00. At an invented average of $2,200 a day, $198.00 goes out daily and collection takes 120 business days (our arithmetic).
Scott County, KY had 24 automotive repair and maintenance establishments in 2023, with 170 paid employees (County Business Patterns, NAICS 8111).
How to calculate a factor rate from an offer sheet: a Georgetown, KY salon's figures
Some offers state the advance and the total to be collected but not the factor. Divide the total by the advance and the factor appears; subtract the advance from the total and the cost appears.
- Find the advance amount on the offer sheet
- Find the total to be collected
- The total over the advance gives the factor
- The total minus the advance gives the dollar cost
Invented example: a Georgetown, KY salon is offered $9,000 with $11,970.00 to be collected. The invented factor is 1.33 and the invented cost $2,970.00. At a 14% holdback on invented card sales of $780 a day, $109.20 is taken daily and collection runs 110 business days (our arithmetic).
Card statements a Scott County, KY therapy or chiropractic office can pull before asking about an advance
A provider weighing an advance may look at how steady card sales are, so recent processing statements are the core of the file. Scott County, KY had 34 offices of other health practitioners in 2023, a group that includes chiropractors and physical therapists, and 73.5% of them had fewer than five employees (County Business Patterns, NAICS 6213).
- Recent monthly card-processing statements
- Business bank statements for the same months
- The name of the card processor and how deposits arrive
- Any advance still being collected, with its balance
- A line or two on the bill the advance would clear
A blog post sets a card-sales advance against a term loan for a pizza kitchen in dollars.
By Cloverland Credit ยท Updated
