Maplevale Credit, a small-business funding service in Johnson City, TN, explains merchant cash advances before any request goes to a funder. An advance is a sale of future receipts, not a loan. This page covers factor rates, holdback agreements, daily remittance, how it compares with revenue-based financing, and the warning signs to watch for.
At a glance
- What it is
Receipts bought ahead, not a loan
- Priced by
Factor rate, which is not interest
- Collected
Taken from daily or weekly receipts
What a Johnson City, TN merchant cash advance buys: future receipts
A merchant cash advance (MCA) is not a loan; it is a sale of receipts. A funder pays a lump sum now in exchange for a larger amount of the business's future card or bank receipts. The funder collects its share, the remittance, as receipts come in, by a daily or weekly debit. There is no interest rate and no loan term; the price is set by a factor rate.
Illustration only, invented figures: a $30,000 advance at a factor of 1.30 means $39,000 is remitted in total, so the advance costs $9,000. If the holdback is 12 percent of $2,000 in average daily card sales, $240 is remitted each day, and the full $39,000 takes about 162.5 days of sales to remit.
Revenue based financing vs MCA in Johnson City, TN
Revenue-based financing and an MCA both take a share of revenue, but they are built differently. Revenue-based financing is a financing agreement repaid as a percentage of monthly revenue up to a cap. An MCA is a purchase of receivables collected daily or weekly. The agreements, the collection method and the legal treatment differ; read the document type at the top of the contract.
The merchant cash advance (MCA) industry, for Washington County, TN businesses
The MCA industry is made up of funders that buy receivables, and the advances are offered to businesses with steady card or bank deposits, such as restaurants, salons and stores. Washington County, TN had 346 accommodation and food services employer establishments and 542 retail trade establishments in 2023 (County Business Patterns); Maplevale Credit holds no data on how many of them use advances.
Before choosing an advance, compare it with working capital and a line of credit, which are loans with interest and a schedule.
A factor rate is not a loan rate: reading an advance's price
People search for a factor rate loan, but a factor rate is the price of an advance, not a loan rate. A factor of 1.30 means every dollar advanced costs $1.30 in remittances. It is not an annual rate: the shorter the remittance period, the higher the cost per year. Multiply the advance by the factor to get the total you will remit, then compare that dollar total with the cost of any loan offer.
| Advance (invented) | Factor (invented) | Total remitted | Cost in dollars |
|---|---|---|---|
| $20,000 | 1.20 | $24,000 | $4,000 |
| $30,000 | 1.30 | $39,000 | $9,000 |
| $50,000 | 1.40 | $70,000 | $20,000 |
What is a holdback agreement: what Johnson City, TN owners should check
Holdback means the percent of each day's receipts that goes to the funder. A holdback agreement, part of the advance contract, sets that percentage, the bank account debited, and what happens when receipts change. Check four points before signing.
- The holdback percentage, and whether remittance is a true percentage or a fixed daily amount.
- Whether the remittance adjusts if sales drop, and how you ask for an adjustment.
- Fees deducted from the advance before it reaches you.
- What the contract says about a default and about selling or closing the business.
Merchant cash advance bankruptcy, explained for Johnson City, TN owners
An advance in a bankruptcy raises legal questions an owner should take to a lawyer, not to a funding service. Whether the funder is treated as a buyer of receivables or as a creditor, and how its claim is handled, are matters for counsel.
Merchant cash advance fraud: a Johnson City, TN primer
Warning signs around any advance offer: terms that are not in writing, pressure to sign the same day, blank fields in the contract, an offer that will not state the total amount remitted, or a caller who asks for your online banking password. If something feels wrong, stop and get advice before you sign.
What a funder may read before an advance
- Bank statements for the operating account, several months back.
- Card processing statements, if the business takes cards.
- A list of any current advances and their daily remittances.
Other funding shapes are compared on the comparison page, county figures are on Johnson City, TN Census figures, and trade notes on the industry pages.
By Maplevale Credit · Updated
