What is a Merchant Cash Advance?
The S300 is the high-performance retail payment solution for multilane merchants who wish to offer high levels of transactional security combined with contactless, e-Signature, magnetic stripe and EMV Chip. With state of the art levels of security design, including PCI PTS 4.x and SRED, the S300 protects and encrypts all transaction information. Featuring a large, color touchscreen and loudspeaker, the S300 comes with a 32- bit ARM11 processor and massive amounts of memory for exceptional multimedia performance. With USB and LAN connectivity options, the S300 offers everything merchants could want in a sleek, stylish payment devices.
What is Holdback?
In a Merchant Cash Advance, the term holdback refers to the set percentage of your daily credit card sales that goes toward repaying the advance. This percentage—commonly between 10% and 20%—remains fixed until the full balance is repaid.
Since repayment is tied directly to your daily card sales, businesses with higher transaction volumes pay back the advance more quickly. On slower days, the amount withheld is smaller. In simple terms, your repayment adjusts naturally according to your credit card revenue, making it proportional to your actual business activity.
The Difference Between Holdback Amount and Interest Rate
There’s a difference between the interest rate a business owner is charged for the advance and the holdback amount. Most MCA providers charge what’s called a “factor” rate. Unlike a traditional term loan, the rate isn’t amortized over the course of the advance. A typical factor rate for an MCA could range between double and triple digits depending upon the provider.
Is a Merchant Cash Advance Right for Your Business?
A Merchant Cash Advance can be a practical option for businesses that need fast access to capital to seize a short-term opportunity. However, it’s essential to ensure the total cost of the advance aligns with your financial goals. Because MCAs have more flexible qualification requirements than traditional small-business loans, they typically come with higher fees.
Even so, many business owners successfully use MCAs as a quick funding solution when speed is a priority.
Important Note:
Since an MCA is not a loan, providers do not report your repayment history to business credit bureaus meaning it won’t help build or improve your business credit profile. Rates also vary widely among providers and are often higher than other financing options. Be sure to review all terms carefully before moving forward.
Is There an Alternative to a Merchant Cash Advance?
Yes many small business owners turn to short-term business loans as an alternative to a Merchant Cash Advance. Those with stronger credit profiles may also qualify for a small business line of credit, which can provide flexible access to funds for temporary cash-flow needs.
For example, a short-term loan from OnDeck can have a repayment term as short as a few months and follows a structure more familiar to traditional borrowers. Payments are typically made daily or weekly, helping business owners manage cash flow by spreading payments throughout the month instead of making a single large payment.
Additionally, OnDeck reports positive repayment activity to the major business credit bureaus, which can help build or improve your business credit profile.