Starbend Commercial Capital, a Las Vegas, NV funding service, explains merchant cash advances: a provider buys part of a business's future card receipts and collects a share of daily sales. The page covers holdback percentages, factor rates, a worked example, credit reporting and stacking, so Clark County, NV owners can compare an advance with a loan.
| Legal form | Purchase of future receivables |
|---|---|
| Is it a loan? | No |
| Collected through | A holdback share of sales |
| Cost expressed as | A factor rate |
| Full- and limited-service restaurants, county | 4,047 (1,739 + 2,308; CBP 2023) |
| Beauty salons with payroll, county | 486 (CBP 2023) |
Does an MCA count as borrowing?
No. In a merchant cash advance, a provider buys a specified amount of your future receivables at a discount. You receive a lump sum; the provider collects a fixed percentage of your card sales, or fixed debits estimated from them, until it has received the purchased amount. Because it is structured as a sale, it is priced and documented differently from a loan, and loan terms such as APR and amortization may not appear in the contract.
Businesses with heavy card sales may be offered advances. Clark County, NV had 1,739 full-service and 2,308 limited-service restaurants, plus 486 beauty salons, with employees in 2023 (CBP 2023); businesses like these that take card payments may be offered advances.
Holdback: the daily slice of card sales
The holdback is the share of each day's card sales sent to the provider until the purchased amount is collected. Illustration only, invented figures: with a 12% holdback, $1,000 of card sales on a given day sends $120 to the provider. When sales dip, the daily amount falls; when sales rise, it rises. Some providers use fixed daily or weekly debits instead and reconcile them against actual sales; ask which method the agreement uses.
Factor rates, and why they are not interest rates
The factor rate sets the total collected. Illustration only, invented figures: a $30,000 advance priced at a 1.30 factor means the provider collects $39,000. The factor rate is not an interest rate: it does not change with time, so remitting faster does not shrink the total unless the contract says so. That makes the effective cost higher the faster the advance is collected.
A merchant cash advance example (illustrative, not an offer)
| Item | Amount |
|---|---|
| Advance paid to the business | $30,000 |
| Total collected (30,000 x 1.30) | $39,000 |
| Cost of the advance | $9,000 |
| Average daily card sales | $2,500 |
| Daily holdback (12% of $2,500) | $300 |
| Days of card sales to collect $39,000 | About 130 |
If card sales averaged $3,500 a day instead, the same $39,000 would be collected in about 93 days: the dollar cost is unchanged, but it is remitted over a shorter period. Compare that total with the total payback of a working capital loan or a line of credit before choosing.
Do advance providers report to business credit bureaus?
Practices vary by provider. Some providers may not report regular collections to business credit bureaus, so an advance remitted as agreed may do little to build a credit profile. Providers may check your credit when you apply, and serious defaults can lead to collections or legal action under the contract. Ask the provider directly what it reports and to whom.
What is loan stacking, and why does it matter?
Stacking means taking a second or third advance or short-term loan while the first is still being collected. Each new holdback takes another slice of the same daily sales, and the combined share can leave too little to run the business. Some advance contracts restrict additional financing; read that clause, and list every existing advance when you talk to Starbend.
- Total amount collected, not just the advance
- The holdback share, or the fixed debit
- Whether early collection lowers the total
- Restrictions on other financing
- What happens if sales stop
Las Vegas, NV trades with heavy card sales
Advances may be offered to trades with heavy card sales: restaurants, salons and barbershops and bars and lounges. The comparison of all six options puts an advance next to loans, the industries page groups every trade, the Las Vegas, NV page has local figures, and how Starbend works explains the request.
By Starbend Commercial Capital · Updated