A merchant cash advance is a purchase of a business's future receivables, not a loan: the funder pays a lump sum and collects a fixed total from future sales through a holdback or set debits. Oakwick Lending Group, a small-business funding broker in Concord, NC, explains holdbacks, factor rates and reconciliation to Cabarrus County owners and connects them with funders, which set the terms.
| What it is | A purchase of future receivables. A merchant cash advance is not a loan. |
|---|---|
| Priced with | A factor rate, which fixes the total amount the funder will collect |
| Collected by | A holdback percentage of sales or fixed debits, often daily |
| Reconciliation | A contract clause that may adjust fixed debits to actual sales |
| Watch for | Stacking, default triggers and personal guarantees |
| Who sets terms | The funder; Oakwick Lending Group only arranges |
| Address | 4 Union St S, Concord, NC 28025 · (980) 352-5260 |
Why an advance is not a loan
A merchant cash advance is not a loan. A loan is borrowed money owed back, with interest, on a calendar. With an advance, the funder buys a specified amount of your future receipts, pays you a smaller sum today, and is entitled to collect the purchased amount as those receipts come in. Because of that structure, the price is not expressed as an interest rate or an APR, and the collection depends on your sales rather than a calendar of installments.
Holdback and remittance
The holdback is the percentage of each day's card sales or deposits that goes to the funder until the purchased amount has been remitted. Some funders take it directly from card processing; others debit a fixed amount from the bank account each business day. A fixed debit is simpler to forecast but does not shrink automatically on a slow day.
Read which method the contract uses, which account it draws from, and what happens on days the account balance is low.
Factor rate and total payback
Advances are priced with a factor rate, a multiplier applied to the amount advanced. Multiply the advance by the factor rate and you have the total the funder will collect. The difference between the two is the cost of the advance.
What the factor rate does not show is time. The same total cost collected over a few months is far more expensive in annual terms than when it is collected over a year, and with a holdback, faster sales mean faster collection. Ask for an estimate of the collection period based on your actual sales, and compare the total cost with what a working capital loan would cost over a similar period. Fees deducted from the advance raise the true cost again.
Reconciliation
Many advance contracts include a reconciliation clause. If you are paying a fixed daily amount and your sales fall, you can ask the funder to adjust the debits to reflect the agreed percentage of actual receipts. How you ask, how often, and what records you must provide are set by the contract. Find that clause before you sign and note the deadlines.
Stacking and default
Taking a second advance while the first is still being collected is called stacking. Two holdbacks against the same sales can leave too little for payroll and suppliers, and many contracts forbid stacking outright. Read the default section too: breaches can include switching processors, closing the account the funder debits, or taking another advance, and the remedies can include a personal guarantee and a UCC filing on receivables.
Who sometimes considers one
Businesses with steady card or deposit volume and a short, specific need sometimes consider an advance, especially when a loan has been declined or would take longer than the need allows. Restaurants and shops are typical of that group. Cabarrus County had 429 restaurants and other eating places and 754 retail employer establishments in 2023 (U.S. Census Bureau, County Business Patterns 2023), both sectors where daily sales flow through card processing.
We put loan options first and look at an advance only when they do not fit. The industry pages describe sector needs, and our Cabarrus County data shows the local business mix.
Before you sign
- Write down the advance amount, the factor rate and the total the funder will collect.
- Note every fee and whether it is deducted from the advance.
- Confirm whether collection is a percentage of sales or a fixed debit, and how often.
- Find the reconciliation clause and its procedure.
- Read the default, stacking and guarantee sections in full.
How a request moves explains where Oakwick Lending Group sits in the process.
By Oakwick Lending Group · Updated