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Thread: How a Merchant Cash Advance Works

  1. #1
    Registered User
    FC Financial LLC
    Join Date
    Feb 2019

    Lightbulb How a Merchant Cash Advance Works

    How a Merchant Cash Advance Works
    An agreement is made between the small business owner and the MCA provider regarding the advance amount, payback amount, holdback and term of the advance.
    Once an agreement is made, the advance is transferred to the business’ bank account in exchange for a future percentage of credit card receipts.

    Each day, an agreed upon percentage of the daily credit card receipts are withheld to pay back the MCA. This is called a “holdback” and will continue until the advance is paid in full.
    Access to a business owner’s merchant account eliminates the collateral requirement required for a traditional small business loan.

    Because repayment is based upon a percentage of the daily balance in the merchant account, the more credit card transactions a business does, the faster they’re able to repay the advance.
    And, should transactions be lower on any given day, the draw from the merchant account will also be less. This means that during times of slow business, the business’ payback is relative to their incoming cash flow.
    Dave Lambert, Business Consultant

  2. #2
    Registered User
    Join Date
    Apr 2021
    United States


    Hi, Advances based on credit card sales are repaid by sharing your future daily revenues with the cash advance company.Advances on regular sales are repaid through bank account debits. The cash advance company debits a fixed amount from your bank account every business day until the funds are paid off.


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