A business that uses a merchant cash advance may pay back 20%-40% of the amount borrowed. This percentage is frequently displayed as a factor rate, which would equivalently be 1.20 – 1.40. (NOTE: There’s a difference between the holdback amount a small business pays every day (as a percentage of their receivables) and the repayment amount for the entire advance. There could, for instance, be a holdback of 15%, and a repayment of 30%, so it’s important for the business owner to understand the distinction.)
For example, a business is advanced $10,000 and agrees to pay back $13,000. This means the payback, or factor rate, is 1.30 or 30% of the advance amount. Moving forward, the business agrees to have 15% of its credit card transactions withheld by the advance company (the holdback) until the $13,000 is collected. If the business is averaging $14,500 a month in credit card sales, approximately $2,160 would be withheld each month and the advance would be paid back in roughly six months.
Typical holdback rates may range from 10%-20%, though this can vary widely based upon the business and the provider’s evaluation of the borrower’s risk.
Is a Merchant Cash Advance Right for My Business?
The smartest way to determine the best source of capital for your business is to consult an experienced professional who truly understands the benefits and risks of the many options that are available to business owners. Speak with Anchor Banc and let then help you make an educated decision about which is the right lending solution for your situation!
At Anchor Banc, we make your business our business!
No Minimum Credit Score | Any Owner Occupied Property Eligible
No Maximum Loan to Value Projection Based Financing Allowed