Truepine Business Funding, a small-business funding broker in Carson City, Nevada, explains merchant cash advances, which are not loans: a funder buys part of future receipts and collects them through a holdback or fixed debits until an agreed total is remitted. We cover reconciliation, factor pricing, stacking and default, and compare loan options first. Funders set all terms.
| What it is | Not a loan: a funder buys future receivables |
|---|---|
| How it is collected | A holdback share of sales, or fixed daily or weekly debits |
| Pricing | A factor applied to the advance sets the total remitted |
| Reconciliation | Adjusts collections to actual sales, where the contract allows |
| Main risks | High total cost, stacking, default clauses, personal guarantees |
| Compare first | Working capital loans and credit lines |
Not a loan: what is being sold
In a merchant cash advance, the funder buys a stated amount of your future receipts at a discount. You receive the purchase price up front, and the funder collects the larger receivable amount as sales come in. Because it is structured as a sale rather than borrowing, a merchant cash advance is not a loan, and it does not carry an interest rate or a fixed term.
Holdback and fixed debits
Collection happens one of two ways. With a holdback, a set percentage of each day's card or bank receipts goes to the funder, so collections rise and fall with sales. With fixed debits, a set amount is withdrawn from the business account each business day or week, based on estimated sales. Fixed debits are easier to plan around but do not shrink automatically in a slow week.
Reconciliation when sales slow down
Many fixed-debit agreements include a reconciliation clause: if actual receipts fall, you can ask the funder to adjust the debit to match the agreed percentage. Read how to request it, how often, and what records you must send. A reconciliation right that is hard to use protects very little.
Factor pricing and the total remitted
Advances are priced with a factor. The advance multiplied by the factor gives the total the funder will collect. Because the collection period is not fixed, a factor cannot be compared directly with a loan's annual percentage rate; the faster the funder collects, the higher the effective annual cost. Always compare the total to be remitted, the expected collection period and every fee deducted from the advance.
A worked comparison with a loan is part of our working capital page; most owners who can qualify for a loan or line of credit pay less that way.
Stacking, default and personal guarantees
Stacking is adding another advance before an earlier one has been fully remitted. Each new funder takes another slice of the same receipts, and many agreements forbid it. Contracts also define default events, such as switching bank accounts or blocking debits, and often include a personal guarantee covering the owner's performance. Read those clauses with the same care as the price.
Liens and records
Funders commonly file a UCC financing statement against receivables or all business assets. That filing can make later loan applications harder until it is terminated. The Nevada UCC search guide explains how to find and clear one.
Questions to settle before accepting an advance
- Is the need urgent, and are loan structures genuinely closed to the business?
- What is the total to be remitted, in dollars?
- Holdback or fixed debit, and is reconciliation available?
- Are there origination or other fees taken from the advance?
- Does the agreement bar other financing until it is fully remitted?
We look at working capital and lines of credit before raising an advance. Sector context for card-heavy businesses such as restaurants is on the sector page; the process page shows how offers are compared; and our disclosures explain the broker role. Data on Carson City businesses is on the local page.
By Truepine Business Funding · Updated