MCA Reference
Plain-English definitions of every term you'll see in a merchant cash advance contract. Bookmark this page when reading offers — funders use these terms freely on the assumption you know them.
Also called: Automated Clearing House
A fixed daily or weekly bank withdrawal from the merchant's operating account to the funder. Most modern MCAs use ACH debits in place of holdback because they're predictable on the funder side — they pull the same amount regardless of whether the merchant had sales that day.
Also called: Funded Amount, Purchase Price
The dollar amount the funder wires to the merchant at signing. Usually net of an origination / underwriting fee, so the merchant receives less than the face amount of the advance. Always confirm whether quoted figures are gross or net.
Any fee deducted from the wire at funding that isn't itemized as origination. Common backend fees include risk assessment, bank processing, and broker commissions. Adds to the merchant's effective APR.
A signed waiver letting the funder enter a judgment against the merchant in court without trial, used historically to fast-track collection. Banned in many U.S. states for out-of-state plaintiffs after 2019, but you'll still see them in legacy contracts. Read this clause carefully.
The fixed amount ACH-debited from the merchant's account every business day until the RTR is satisfied. Total payback ÷ number of business days in the term = daily payment.
Triggered when the merchant misses a debit, blocks the ACH, switches bank accounts without funder approval, or violates a contract covenant. Default typically accelerates the full RTR and may trigger personal-guarantee enforcement.
Also called: Factor
The multiplier applied to the advance to determine total payback. A 1.40 factor on a $100,000 advance means the merchant owes $140,000. Typical range is 1.15–1.50. Lower factor rates usually pair with shorter terms or stronger underwriting.
Also called: Purchaser, MCA Provider
The party providing the advance. Not technically a lender — MCAs are structured as a purchase of future receivables, not a loan, which is what places them outside usury laws in most states.
Also called: Personal Guarantee
A signed promise from one or more business owners to cover the RTR personally if the business defaults. Most MCAs require at least one personal guaranty. Check whether it's limited (capped) or unlimited.
Also called: Specified Percentage, Retrieval Rate
The slice of daily card-batch sales the funder collects toward the payback amount. A 15% holdback on $5,000 of daily card sales = $750/day to the MCA. Flexes with revenue, unlike fixed daily ACH debits.
A broker who sources merchants for funders and takes a commission on each funded deal. On FundingTracker, ISO is one of three relationship roles (broker / funder / ISO) on a deal — see the Broker / Funder / ISO settings on each contract.
An upfront fee — typically 1–10% of the advance — deducted from the wire at funding. On a $100,000 advance with a 5% origination fee, the merchant receives $95,000 net but still owes payback on the full $100,000 RTR.
A contractual right (in some MCAs) for the merchant to request an adjustment to the daily debit if revenue drops materially. Rarely granted in practice but worth knowing exists. Usually requires bank-statement evidence and funder approval.
Also called: Total Payback, Purchased Amount
The total amount the funder is contractually entitled to collect: advance × factor rate. A $100,000 advance at a 1.40 factor has an RTR of $140,000. This is the figure that needs to be paid back — not the advance amount.
Same as holdback percentage. The fraction of daily card-batch sales the funder collects until RTR is satisfied. Contract language varies — some use holdback, some specified percentage, some retrieval rate; mechanically they're identical.
Holding multiple MCAs simultaneously. Most contracts explicitly prohibit it; some funders will call the full RTR due if stacking is discovered via bank-statement audit. Cumulatively the daily debits can also exceed daily revenue, which is why FundingTracker visualizes total-daily-impact across all your active advances.
The expected payback period — usually quoted in business days for daily-ACH MCAs (e.g. 126 business days ≈ 6 months) or in calendar weeks for weekly MCAs. Holdback MCAs don't have a fixed term; payback ends whenever cumulative card-sales × holdback = RTR.
Also called: Effective APR
The annualized cost of the advance, accounting for the actual payment schedule. Not the same as factor rate. A 1.40 factor over 6 months works out to ~80% APR; over 12 months, ~40% APR. Use APR (not factor rate) when comparing an MCA against any other financing product.
A Uniform Commercial Code lien recorded against the merchant's receivables, giving the funder a public claim if the merchant tries to sell the business or take on new financing. Filed by most funders at closing.
Now that you know the terms, plug in your offer and see the real numbers. Factor rate to APR, projected payoff, daily cash impact — free, no signup.
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