Merchant cash advance companies buy a share of a business’s future card sales, so the numbers to total up before signing are the factor, the holdback and the total collected. One invented Myrtle Beach, SC gift shop advance is worked day by day here, the same terms are run at a quick-service restaurant, and a short-term loan is set beside both.
An invented $13,400 advance at a 1.28 factor: $17,152.00 collected and $3,752.00 of cost, reached in about 79 business days at a gift shop averaging $1,450 of daily card sales and about 50 at a quick-service restaurant averaging $2,300. In the same invented case a 9-month loan of $13,400 costs $871.57 in interest.
How Merchant Cash Advance Companies Take the Holdback From Daily Card Sales
What the gift shop signs in this post is an advance, and it is not a loan. The provider pays a lump sum now and collects a fixed share of each day’s card sales, the holdback, until a set total is reached. A day with more card sales sends more to the provider; a day with fewer sends less.
Card sales run through both kinds of business named above. ZIP 29577 held 489 retail trade employer establishments and 449 in accommodation and food services in 2023 (ZBP).
Illustration only, invented figures: a Myrtle Beach, SC gift shop takes $13,400 at a 1.28 factor with a 15% holdback. One invented week of card sales shows how the daily amount moves:
| Day | Card sales | Holdback collected |
|---|---|---|
| Day 1 | $1,420 | $213.00 |
| Day 2 | $980 | $147.00 |
| Day 3 | $1,650 | $247.50 |
| Day 4 | $2,210 | $331.50 |
| Day 5 | $1,130 | $169.50 |
| Day 6 | $760 | $114.00 |
| Day 7 | $1,890 | $283.50 |
| Week | $10,040 | $1,506.00 |
In this invented week the provider collected $1,506.00 out of $10,040 of card sales, from $114.00 on the lightest day to $331.50 on the heaviest.
Factor Rate, Total Collected and the Real Cost to Compare
The factor turns the advance into a total: $13,400 times 1.28 is $17,152.00, so the invented cost is $3,752.00 whatever happens to sales. Sales change only the time it takes.
| Business | Average daily card sales | Daily holdback | Business days to the total |
|---|---|---|---|
| Gift shop | $1,450 | $217.50 | 79 |
| Quick-service restaurant | $2,300 | $345.00 | 50 |
The dollar cost is the same in both rows, but at five business days a week the restaurant reaches the total in about 10 weeks and the gift shop in about 16, so the restaurant pays the same $3,752.00 over a shorter stretch. A 1.28 factor cannot be read like an annual rate: the shorter the collection, the higher the cost per month.
A Short-Term Loan as the Alternative to Weigh
A short-term loan prices the same need differently: a fixed payment, an annual rate, and interest that shrinks as the balance is paid off.
Illustration only, invented figures: the gift shop instead takes $13,400 as a 9-month working capital loan at a 15.35% annual rate. That invented loan asks $1,585.73 a month for nine months, $14,271.57 in all; its $871.57 of interest sits against the advance’s $3,752.00 cost.
The loan costs less in this invented case, but its fixed payment is due even in a week of weak card sales, while the holdback shrinks with sales. Whatever rate, term and fees a loan carries are set by the funding partner reviewing it, not by Cedarbend Capital. The working capital page covers fixed-payment loans, and a line of credit is a third choice when the need comes and goes.
Contract Lines to Read Before Signing an Advance
Before signing an advance, find these lines in the contract and make sure each one is clear:
- The purchase price (the amount paid out) and the total to be collected, both in dollars
- Whether collection is a share of card sales or a fixed daily or weekly debit from the bank account
- How the daily amount is adjusted if card sales fall, and what the business sends to ask for an adjustment
- Whether collecting the total early earns a discount, or the full total is owed regardless
- Fees withheld from the amount paid out
- Any limit on taking other funding while the advance is open
Cedarbend Capital does not interpret contracts; an attorney or the business’s accountant can review the terms. The merchant cash advance page has a second worked case. With an offer in hand, call (843) 256-2591 or use the request form; the articles page lists the other posts.
By Cedarbend Capital · Updated
