A merchant cash advance is not a loan but a sale of future business receivables: a funder pays a lump sum and collects an agreed share of sales until a set total is delivered. Kitehill Commercial Capital, a small-business funding broker in Greenville, South Carolina, explains the mechanics and costs and connects owners with funders, which set every term.
| What it is | A purchase of future receivables. A merchant cash advance is not a loan. |
|---|---|
| How it is collected | A percentage holdback of sales, or fixed daily or weekly debits |
| Cost | The total delivered minus the cash received; the factor is not an interest rate |
| Watch for | Stacking clauses, reconciliation rights, default terms, personal guaranties |
| Who sets terms | The funder, not Kitehill Commercial Capital |
| Office | 101 W Court St, Greenville, SC 29601 · (864) 302-0567 |
Why a merchant cash advance is not a loan
With a loan, you borrow money and owe it back with interest on a schedule. With a merchant cash advance, a funder buys a portion of your business's future receivables, such as card sales or deposits, at a discount. You receive the purchase price up front, and the funder collects its purchased receivables as they come in. A merchant cash advance is not a loan, and the agreement will say so.
That difference changes the vocabulary. Advances are not repaid; the purchased amount is remitted or collected. The price is not an interest rate but a factor: the total to be delivered divided by the amount advanced. And the length of the arrangement is not fixed, because it depends on how fast your sales come in.
Holdback, remittance and reconciliation
Funders collect in one of two ways. With a percentage holdback, a set share of each day's card sales or deposits goes to the funder, so collections rise in busy weeks and fall in slow ones. With fixed debits, the funder takes a set amount from your bank account each business day or week, estimated from your average sales.
Many fixed-debit agreements include a reconciliation clause that lets you ask for the debit to be adjusted when sales fall. Read how to request it, what records you must provide and how quickly the funder must respond. A reconciliation clause you never use protects nothing.
A worked example, in round numbers
Hypothetical arithmetic only, not an offer or a typical term. Picture a coffee shop that agrees to deliver a fixed total out of its card sales through a percentage holdback. In a normal month the holdback produces a steady daily remittance. If sales drop by a third in a slow month, the daily remittance drops by a third too, and the arrangement simply runs longer. If the same shop had agreed to a fixed daily debit instead, the debit would stay the same in the slow month and take a bigger share of a smaller day's sales.
The MCA sales scenario calculator runs the holdback side of that comparison with your own advance, factor, holdback and daily sales, so you can see slow, normal and busy months side by side before signing.
What it really costs
The cost of an advance is the difference between what you receive and what you deliver, plus any charges deducted at funding. Because the advance has no fixed term, the same dollar cost feels very different depending on how quickly it is collected: the faster your sales are, the shorter the arrangement and the higher the effective cost over time. Compare offers on three numbers: cash you actually receive, total you will deliver, and the realistic collection period based on your own sales history.
Stacking: taking a second advance before the first is done
Stacking means taking another advance, or other financing, while an earlier advance is still being collected. Each new funder collects from the same sales, so the combined holdback or debits can quickly crowd out payroll and suppliers. Many agreements prohibit stacking or treat it as a breach. If you already have an advance, say so at the start; partners will see it in your bank statements in any case.
What happens if things go wrong
Every agreement defines its own events of default, and the consequences are written into the contract. Read the default section closely, including any personal guaranty, any security interest the funder files and what happens to the remaining purchased amount. Advance funders commonly file UCC financing statements; the South Carolina UCC guide explains how to find them.
When an advance is the wrong tool
If the need is a predictable timing gap, working capital financing or a line of credit may cost less and run on a known schedule. An advance tends to suit businesses with steady card sales and a short, specific need, and even then only after the total cost has been compared with the alternatives.
When we present an advance offer, we walk through the total to be delivered, the collection method and the default clause with you. The broker disclosures describe the relationship, and how a request moves shows the stages. Owners in other sectors can check funding by industry, and the Greenville, SC page has local context. More answers are in the FAQ.
By Kitehill Commercial Capital · Updated
A question for the Greenville office?
Unsure which type fits? Call, or start online.