A merchant cash advance is a purchase of a business's future receipts, not a loan: a funder pays a sum now and collects an agreed larger total from future sales. Silvershore Funding Group, a small-business funding broker in Flagstaff, Arizona, explains holdback percentages, remittance, reconciliation and stacking, and compares advances with loan options. Funders set every term.
| What it is | A purchase of future receipts; not a loan |
|---|---|
| How it is collected | A holdback percentage of sales, or fixed debits |
| Cost to compare | Total to be remitted minus the amount received |
| Common terms | Personal guarantee of performance, UCC filing, no-stacking clause |
| Who sets terms | The funder, not Silvershore Funding Group |
| Office | 10 N Leroux St, Flagstaff, AZ 86001 · (928) 239-1321 |
Not a loan: what you are actually selling
A merchant cash advance is not a loan. The agreement is a sale: the business sells a portion of its future receivables to a funder for a purchase price paid now. The funder collects its share as the receivables come in, until it has received the total the agreement specifies. Because it is structured as a purchase, an advance is described with different words from a loan: the funder buys, the business remits, and the cost appears as the difference between what the business received and what it must remit.
Holdback, remittance and reconciliation
The holdback percentage
The holdback is the share of each day's receipts that goes to the funder. With split-funding, the card processor sends that share straight to the funder before the rest reaches you. On a slow day the funder receives less; on a busy day, more. That flexibility is the main feature that sets an advance apart from a loan payment.
Fixed debits instead of a percentage
Many agreements replace the percentage with a fixed daily or weekly debit from the bank account, calculated from expected sales. That is simpler for the funder but removes the automatic slowdown on slow days. Agreements built this way often include a reconciliation clause allowing the business to ask for the debit to be adjusted to actual receipts. Find that clause, and the steps for using it, before you sign.
Factor rate and total cost
Advances are usually priced with a factor rate: a multiplier applied to the purchase price to set the total to be remitted. The cost of the advance is that total minus what you received. Because the total is fixed while the time to collect it varies, the effective annual cost rises the faster the advance is remitted, which makes a factor rate hard to compare with a loan's interest rate.
The cleanest comparison is in dollars: what do I receive, what will I remit in total, and roughly how long will that take at my real sales? Our holdback and remittance estimator does that arithmetic with the numbers from an offer.
Stacking, guarantees and default
- Stacking. Taking a second advance while the first is still being remitted means two funders collect from the same receipts. Many agreements prohibit it, and stacking is a common route into cash-flow trouble.
- Guarantee of performance. Owners are often asked to guarantee that the business will perform its obligations, such as not diverting receipts or switching processors.
- UCC filing. Funders often file a UCC financing statement against receivables or all business assets, which shows up in public records and can affect later financing. Our Arizona UCC records guide shows how to find such filings.
- Default. Read what counts as a breach and what remedies the funder has. These clauses can be severe.
If you already have an advance and are struggling, talk to the funder early about reconciliation, and consider getting independent advice before signing anything new.
Do merchant cash advances report to credit bureaus?
Reporting practices vary by funder. Ask directly whether the funder reports remittance to any business or personal credit bureau, and whether it will check your credit when you apply. Whatever the answer, a UCC filing is a public record that other lenders can see.
Who gets offered advances in Coconino County
Advances are marketed most heavily to businesses with steady card sales. Coconino County had 550 retail employer establishments and 437 food service and drinking places in 2023 (U.S. Census Bureau, County Business Patterns 2023), many of them taking cards every day, which makes them frequent targets for advance offers.
For most of those businesses, the first comparison should be with working capital financing or a line of credit. An advance can make sense when speed or flexible remittance matters more than cost, but only after the total has been worked out. Local business figures are on our Flagstaff page, and sector pages are under financing by industry.
Before you accept an advance
- Write down the amount you will receive after any fees are deducted.
- Write down the total you will remit.
- Estimate how long remittance will take at your real daily sales.
- Find the reconciliation, stacking, guarantee and default clauses.
- Compare the result with at least one loan option.
A merchant cash advance is not a loan, and the funder, not Silvershore, sets its terms. How a request moves explains our part.
By Silvershore Funding Group · Updated