Merchant Cash Advances in Gulfport, MS for Auto Shops and Clinics With Card Sales

A card-sales merchant cash advance collects a fixed share of card sales, though some contracts take a fixed daily debit instead. Revenue-based financing usually collects a share of all revenue, including checks, ACH transfers and card payments, often monthly, until a set multiple has been paid. A law firm paid mostly by check or wire would see little collected under a card-sales advance and should read how any revenue-based contract defines revenue.

Some revenue-based contracts are written as loans and some as purchases of receivables. The label in the contract decides which rules apply, so the firm should know which one it is signing, and have its own lawyer read it.

No. What the business signs is a sale of future card receivables, not a loan. The provider buys a share of future card receivables at a discount and collects it as card sales settle. There is no interest rate, no fixed term and, in a true sale, no fixed monthly payment; collections rise and fall with sales.

A physician office paid mostly by insurers takes few card payments, so an advance tied to card sales seldom suits it. A working capital loan or a line of credit is the usual comparison for an office waiting on claims.

The holdback is the share of each day's card sales the provider keeps until the agreed total is collected. In the invented law-firm example, a 12% holdback on $1,000 of daily card payments sends $120 to the provider and leaves $880. The holdback does not change the total owed; it changes how soon the provider has collected it.

A low holdback on low card volume means collection stretches out; a high holdback on a large settlement day can leave little cash for payroll. The firm should test the holdback against its slowest weeks of card sales, not its average.

The factor rate is the multiple of the advance that the business sends back. For the dental office in this invented example, a $30,000 advance at 1.32 has a $39,600 collection target. The difference above the advance is $9,600, not an annual interest rate. With a holdback of 12% and card settlements of $2,500 a day, the provider collects $300 a day, so collection takes about 132 days of card sales.

The factor alone hides the time. The same cost collected over fewer days is a much higher yearly cost than over more days, so the dental office should ask for the expected collection period and every fee before comparing the advance with a loan.

For a dental office with steady card payments, a credit line is the first comparison. Illustration only, invented figures: drawing $30,000 on a line at an annual rate of 12% and paying it off in six monthly payments of $5,176.45 costs $1,058.70 in interest, against the $9,600 cost of the advance in the example above.

An advance can still make sense when a line is not available or the timing is too short for one, but the comparison should be made in dollars. Card payments are only one part of revenue at the 69 Harrison County, MS dental offices in County Business Patterns for 2023 (NAICS 6212), whose payrolls carried 564 people (figures from the same 2023 table).

The provider reviews the dental office's card processing statements, agrees an advance amount, a factor and a holdback, and pays the advance into the business account. From then on, the agreed share of daily card settlements goes to the provider, either split by the card processor or debited from the bank account, until the total is collected.

Rowancroft Lending can refer a merchant cash advance request to providers among its funding partners. Each provider reviews the request and sets the advance, the factor and the holdback itself. An advance is not a loan.