Quarryfield Capital Group, a small-business funding broker in Hillsboro, Oregon, explains merchant cash advances and connects owners with funders. A merchant cash advance is not a loan: the funder buys a share of future receipts and collects it through a holdback or fixed debits. The cost is set by a factor. Funders review receipts, decide and set every term.
| What it is | Sale of future receipts; never a loan |
|---|---|
| Cost | Advance times a factor |
| Collection | A holdback share of receipts, or fixed debits |
| Ends | When the purchased amount has been collected |
| Funders examine | Card and bank receipts |
| Who decides | The funder |
Selling future receipts, explained
A merchant cash advance is a sale, not a loan. A funder pays the business a lump sum today in exchange for a larger amount of its future card or bank receipts. The funder then collects that purchased amount by taking an agreed share of receipts, called the holdback, or by debiting a fixed sum from the bank account on a set schedule until the full amount has been remitted.
Because it is structured as a purchase of receivables, an advance is priced and documented differently from a loan, and many of the protections and conventions owners expect from loans do not carry over. That is why we treat it as the option to look at last, after working capital and a line of credit.
The factor and the total remitted
Instead of an interest rate, an advance carries a factor. Multiply the amount advanced by the factor to get the total the funder collects. In a hypothetical case used only to show the arithmetic, a $20,000 advance at a factor of 1.30 means $26,000 is remitted in total, so the cost is $6,000.
A factor is not an annual rate. If that $6,000 is collected over four months, the effective cost is far higher than the same $6,000 spread over a year. When comparing an advance with a loan, look at the total dollars remitted and how quickly they leave the account, not at the factor alone.
How the funder collects, and how to adjust it
With a holdback, the funder takes a fixed percentage of daily card receipts. When sales slow, the amount collected each day falls with them; when sales are strong, it rises. With fixed daily or weekly debits, the amount does not change with sales, and many agreements offer a reconciliation process that adjusts debits to match actual receipts if the business asks for it.
Ask exactly how reconciliation works, how to request it, and how quickly an adjustment takes effect. Those details matter most in the weeks when receipts are down.
Stacking and default
Stacking: a second advance signed while the first funder is still taking its cut. Each new holdback or debit comes out of the same receipts, and the combined collections can leave too little for payroll and suppliers. Many agreements prohibit stacking outright, and partners for other products look hard at any advance already in place.
Agreements also define what counts as a default, such as switching card processors or blocking debits, and what the funder may do in response. Read those sections carefully, and have an attorney review them if anything is unclear.
Card-heavy businesses in Washington County, OR
Advances are built around card receipts, so they show up most in card-heavy businesses. Washington County, OR had 1,346 food service and drinking place employer establishments in 2023, and 1,588 retail stores (County Business Patterns 2023). For a restaurant whose sales are mostly cards, an advance is a familiar offer; that does not make it the cheapest one.
The sector pages compare options for restaurants and other confirmed sectors, and our Hillsboro, OR page has local figures.
The narrow cases where owners still choose one
An advance is rarely the cheapest money available, but there are narrow cases where owners still choose it: a business with strong card sales and thin credit history, a short and clearly defined need, and no other offer on the table in the time available. Even then, compare the total remitted with what a short working capital product or a line of credit would cost, and check that the daily holdback still leaves enough for payroll and rent.
If the business is already struggling to meet its obligations, an advance usually adds pressure rather than relief.
Six questions for the funder, in writing
- In dollars, what will leave my account in total?
- Will you take a percentage of card sales or a set debit, and on what days?
- How does reconciliation work, and how do I request it?
- What fees come out of the advance before it reaches my account?
- Which events trigger default, and what follows?
- Is a second advance prohibited while this one is outstanding?
The process page explains how we present offers side by side.
By Quarryfield Capital Group · Updated