A merchant cash advance is not a loan but a purchase of a business's future receivables, collected through a holdback on sales or a fixed remittance. Ivybend Advances, a small-business funding broker in Missoula, MT, explains factor rates, reconciliation and stacking; funding partners make the decisions and set every price and term.
| What it is | A sale of future receivables, never a loan |
|---|---|
| Collected by | A holdback on card sales or a fixed remittance |
| Priced by | A factor rate rather than an interest rate |
| Main risk | High total cost and stacked daily remittances |
| Missoula County, MT context | 371 accommodation and food services employers (CBP 2023) |
| Who decides | The funder; Ivybend only makes the introduction |
What the funder buys
What does merchant cash advance mean in practice? The funder pays you a sum today in exchange for a larger amount of your future receivables. You are not borrowing; you are selling a slice of sales you have not made yet. Because it is structured as a sale, the agreement uses words like purchase price, purchased amount and remittance rather than principal and interest.
Holdbacks and fixed remittances
What is a holdback rate, in plain terms? It is the percentage of each day's card sales (or deposits) the funder collects until the purchased amount is delivered. With a true holdback, a slow day means a smaller remittance and a strong day a larger one. Many agreements instead set a fixed daily or weekly remittance debited from the bank account, estimated from average sales.
A fixed remittance behaves like a loan payment on your cash flow, even though the contract is not a loan. If sales dip, the debit does not.
Reconciliation
Reconciliation is the clause that lets you ask the funder to adjust a fixed remittance to match actual receipts. Read how it works: who asks, how often, what statements you must send and how quickly the funder responds. An agreement whose reconciliation process is vague or hard to use deserves extra caution.
Factor rates and the full cost
How to calculate factor rate cost: multiply the advance by the factor rate to get the total the funder will collect. The factor rate formula is simply purchased amount divided by advance. A hypothetical example, not an offer: a funder advances $20,000 at a factor of 1.3, so it collects $26,000, and the cost is $6,000.
That $6,000 is the same whether it is collected over four months or eight, which is why a faster collection makes the effective cost much higher when you set it beside a loan's annual rate. Ask the funder for the total remittance, the expected collection period and every fee deducted from the advance before it reaches you.
Stacking and default
Stacking is signing a second advance before the first one has finished collecting. Two sets of daily debits on one bank account can drain it quickly, and many agreements forbid stacking outright. Default terms matter too: some agreements include a confession of judgment or a personal guarantee of performance. Have a lawyer read any clause you do not fully understand.
Questions to ask before signing an advance
- What is the total purchased amount, and what is deducted from the advance before it reaches me?
- Is collection a true percentage of sales, or a fixed daily or weekly debit?
- How does reconciliation work, and how fast does the funder respond?
- What counts as default, and what remedies does the agreement give the funder?
- Does the agreement bar any other funding until it is fully collected?
If any answer is missing from the written agreement, ask for it in writing before you sign.
Missoula County, MT businesses that get advance offers
Advances are built around card sales, so they come up most with businesses that take many card payments. Missoula County counted 371 accommodation and food services employer establishments and 543 retail employer establishments in 2023 (CBP 2023). An advance can work for a short, specific need where a loan is not available in time, but it should rarely be the first option considered.
Compare it with working capital financing before signing, and see how card-heavy sectors use each shape on the sector pages. Local business counts are on the Missoula County overview, and the broker process covers how we handle a request.
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