Richmond, KY Merchant Cash Advances: The Factor, the Holdback and the Days to Collect

1. The provider reviews recent card and bank deposits and makes an offer: an advance amount, a factor and a holdback percentage.
2. The business signs an agreement selling a set amount of future card sales, equal to the advance times the factor.
3. The provider sends the advance to the business bank account.
4. From then on, the provider receives its percentage of every business day's card sales, either routed by the card processor or pulled from the bank account.
5. Collection stops once the full amount sold has been collected.

Illustration only, invented figures: a quick-service restaurant takes a $16,000 advance at a 1.32 factor, so in this invented example it sells $21,120.00 of future card sales. Card sales in this invented case average $1,705 a day and the holdback is an invented 11%, which sends $187.55 to the provider per business day; at that pace the invented total takes 113 business days to collect, rounded up.

The cost of the advance in this invented example is $5,120.00: the gap between what is collected and what was advanced.

Gasoline stations counted 53 employer establishments in Madison County, KY in 2023, with $25.1 million in annual payroll (County Business Patterns, NAICS 4471). That same year, 39 gasoline station establishments carried ZIP 40475 addresses in ZIP Code Business Patterns.

A factor multiplies the advance; it is not an interest rate. A 1.29 factor means the business sells 1.29 times the advance in future card sales. The factor does not move with how long collection takes, so the dollar cost is fixed when the agreement is signed.

Illustration only, invented figures: the station store's offer is a $23,750 advance at a 1.29 factor. In this invented example the store sells $30,637.50 of future card sales, and the advance costs $6,887.50, or 29 cents for each advanced dollar.

Reading an offer in dollars makes two offers with different factors and amounts comparable. A factor that looks small can still mean a large dollar cost on a large advance.

ZIP Code Business Patterns placed 35 full-service restaurant establishments at ZIP 40475 addresses in 2023 (NAICS 722511).

In an advance agreement, the restaurant sells part of its future card sales to the provider. There is no interest rate, no monthly installment and no fixed end date; the provider is paid out of card sales as they happen. Clauses to read before signing:

• The total amount sold, which is the advance times the factor, and the holdback percentage.
• How the share is taken: a split at the card processor or a debit from the bank account.
• What happens if card sales fall, and whether the agreement allows the daily amount to be reconciled.
• Whether collection can be finished early, and whether any discount applies if it is.
• Deductions from the advance amount, such as fees, before the money lands.

These terms differ from provider to provider, so the agreement itself is the place to check them. Ledgecrest Lending does not draft advance agreements; the provider does.

Retail trade employer establishments with a ZIP 40475 address numbered 221 in 2023, more than any other sector in that ZIP (ZIP Code Business Patterns).

The holdback percentage decides the pace of collection, not the total. For a gift shop taking cards at the register, a higher holdback takes more of each day's sales and finishes sooner; a lower one leaves more cash in the till each day and runs longer.

In this invented example both holdbacks collect the same $12,248.50, so the $2,898.50 cost is identical. The 14% holdback finishes 57 business days sooner but takes $43.00 more out of each invented day's card sales.

Three steps turn an advance offer into a daily cost:

1. Start with the advance times the factor: that product is the total the provider collects.
2. Subtract the advance from that total to get the cost in dollars.
3. Divide the total by the daily holdback amount for the business days, rounding up, then divide the cost by those days.

Illustration only, invented figures: a coffee shop is offered $7,500 at a 1.27 factor with a 10% holdback, and its card sales run $1,030 a day in this invented example. The total collected is $9,525.00 and the cost $2,025.00; at $103.00 a day the invented collection runs 93 business days, so the advance costs $21.77 per business day.

That daily figure can be set next to what the money is for. If the advance pays for a bulk bean order that saves the shop more than $21.77 a day in this invented case, the arithmetic favors it; if not, the advance costs more than it returns. The calculator on this page takes the same four inputs (advance amount, factor, holdback and average daily card sales) and shows the total, the cost and the business days.

Beauty salons counted 12 employer establishments in Madison County, KY in 2023, with 74 paid employees (County Business Patterns, NAICS 812112).

A percentage holdback takes a set share of each day's card sales, so a weak card day sends less and a closed day sends nothing. A fixed daily debit takes the same dollar amount from the bank account every business day, whatever the card sales were; some agreements allow that amount to be adjusted if sales fall, and some do not.

Illustration only, invented figures: a salon takes a $14,000 advance at a 1.3 factor, selling $18,200.00 of future card sales. Under an invented 12% holdback, a five-day week with $6,300.00 of card sales sends $756.00, while the fixed debit below would take $825.00 over the same five business days whatever the sales.

Under an invented fixed debit of $165 a day, collection takes 111 business days: 110 debits of $165 and a last invented one of $50.00.

The fixed debit is simpler to forecast; the percentage holdback follows the salon's actual card days. A salon with uneven weeks can ask which method an offer uses before comparing it with others, and the line of credit page shows a different way to cover the same gap.