A merchant cash advance buys part of future card sales. The cost is fixed by the factor; the holdback sets how many days collection takes. Invented figures on this page show both for an auto repair shop.
At a glance
- What it pays for
Payroll, parts or any short business cost
- How it is collected
A share of each business day's card sales
- Who sets the terms
The provider that makes the offer
How a Merchant Cash Advance Works When a Hanford, CA Auto Shop Covers Technician Payroll
An auto repair shop with two technicians to pay before a large invoice to a business customer clears can sell part of its future card sales. The provider pays a lump sum, and an agreed share of each business day's card sales goes to the provider until the agreed total is collected. A post on a cafe advance follows the daily split through four weeks of a cafe's bills.
An advance of this kind is a purchase of future receivables, so it is not a loan and carries no interest rate.
Illustration only, invented figures: a Hanford, CA auto repair shop takes a $16,970 advance with a 1.39 factor and a 12% holdback, and its card sales average $2,245 a business day. In this invented example, the total collected is $23,588.30, the provider takes $269.40 a day, and the total is collected in about 88 business days.
A provider reviewing a request like this may ask for several months of card processing statements and bank statements, since the advance is priced on the sales those statements show. It may also ask how many card terminals the shop runs and which processor settles them.
One Advance Cost Over Three Card-Sales Paces at a Hanford, CA Auto Repair Shop
On every business day, the holdback percentage of that day's card sales is sent to the provider. A fixed percentage means the daily amount moves with sales: a stronger day sends more, a weaker day sends less, and the total stays the same.
| Average daily card sales | Collected per business day | Days to collect the total |
|---|---|---|
| $1,685 | $202.20 | 117 business days |
| $2,245 | $269.40 | 88 business days |
| $2,805 | $336.60 | 71 business days |
In this invented example, the auto repair shop pays the same cost of the advance in all three rows; only the number of days changes. For a smaller bill at a repair shop, a post on an auto shop’s van repair sets an advance beside a six-month loan.
Three Factors Turned Into Dollars for a Kings County, CA Grocery Store's Supplier Payments
The factor turns into a dollar cost with one multiplication: the advance times the factor is the total collected, and the total minus the advance is the cost. A grocery store weighing an advance for supplier payments can work it out before calling. A post on grocery and clothing store stock prices inventory financing and a reorder line for the same kind of store.
| Factor | Total collected | Cost of the advance |
|---|---|---|
| 1.18 factor | $12,348.70 | $1,883.70 |
| 1.28 factor | $13,395.20 | $2,930.20 |
| 1.35 factor | $14,127.75 | $3,662.75 |
Of the 318 retail trade establishments with paid employees in Kings County, CA in 2023, 39.0% had fewer than five employees (County Business Patterns). Card sales at a grocery counter come in every day the store is open, which is the cash flow an advance draws on. A pizzeria’s counter works the same way, and a day-by-day collection log for a pizzeria shows the split at work over ten days.
Lab Bills at a Hanford, CA Dental Office: Daily Collections Next to a Monthly Invoice
A dental office that pays its dental lab once a month and takes card payments every day has two different rhythms. An advance pays the lab bill in one sum, and the collections then come out of daily card sales.
Illustration only, invented figures: a dental office takes a $7,365 advance with a 1.22 factor and an 8% holdback on $1,935 of average daily card sales. In this invented example, the provider collects $154.80 a day; the $8,985.30 total takes about 59 business days, and $1,620.30 of it is the cost.
County Business Patterns counted 37 offices of dentists in Kings County, CA in 2023, with 312 paid employees between them (NAICS 6212).
Settling an Advance Before the Full Amount Is Collected: Software Renewals at a Kings County, CA Shop
A shop that used part of an advance for a software renewal may want to close it out early once a large invoice is paid. Whether settling early lowers the total depends on the agreement: some agreements list an early-settlement amount, and others expect the full total no matter when it arrives.
Illustration only, invented figures: in the auto repair shop case above, after 60 business days at $269.40 a day the provider has collected $16,164.00, and $7,424.30 of the invented total remains.
The agreement, not the provider's sales pitch, says what that remaining amount can be settled for.
What a Hanford, CA Owner Reads in an Advance Agreement Before Signing
- The advance amount and the factor, and the total they produce.
- The holdback percentage and which account or card processor it comes from.
- Which days count as collection days.
- Whether an early-settlement amount is listed.
- What happens if the business changes card processors.
An owner can bring these points to the call at (559) 384-6818; the provider that makes an offer answers for its own terms.
By Orchardstone Lenders · Updated
