The amount that can be borrowed is determined by your average credit card sales. The provider will review your receipts over the previous three to six months to calculate how large of an advance you’re eligible for. Traditionally an advance can range from 50% up to 90% of your business’s credit card transactions.
Payments are deducted from the daily credit card sales and calculated according to the agreed-upon retrieval rate. For example, at a rate of 15 percent with $3000 dollars in sales, the payment would be $450 dollars. If the sales totaled $5000 dollars, the payment would be $750 dollars. Depending on the MCA provider, these payments are collected one of three ways:
- Split withholding: Payments will be made automatically through the merchant’s credit card processor. They split the revenue received and send the MCA provider’s percentage directly to them. The remaining revenue would be sent to the merchant’s business account.
- Lock-box withholding: Credit card revenue is sent to a special bank account that is opened in the merchant’s name. The provider will have partnered with the bank so that if they provide appropriate contracts their “split” will be automatically sent to the company and the remaining revenue will then be automatically forwarded to the merchant’s regular business account.
- ACH withholding: The provider’s percentage is automatically deducted from the business account via ACH which executes an electronic transfer of funds between bank accounts.