This is the direction the product actually runs in. A funder does not set a term and derive a payment — it sets a percentage of receipts and lets the term fall out of how the business trades. Everything about how an advance behaves under stress follows from that, including whether a court will later agree it was not a loan.
The share of receipts taken each business day. Usually 8–20%.
Our floor is $30K. Most of the feed runs $50K–$150K.
12% of roughly $5,714 a business day.
About 98 business days.
Change the revenue and watch the term move. That is the whole product: there is no fixed maturity, only a percentage of receipts, so a slow quarter stretches the advance rather than breaching it — which is exactly what a reconciliation clause is supposed to guarantee, and exactly what courts now check funders actually did.
A 12% holdback on a merchant doing $120,000 a month takes about $686 a business day, repaying a $50,000 advance at 1.35 in roughly 4.7 months — and if revenue falls, the term stretches rather than the merchant defaulting.
Usually 8% to 20% of daily receipts. Lower holdbacks stretch the term and are easier on the merchant’s cash flow; higher ones shorten it and raise the effective annualised cost, because the same dollar cost is earned over less time.
On a genuine holdback, the term extends and the daily payment falls with the receipts. That is what a reconciliation provision is for, and its presence is one of the three factors New York courts weigh when deciding whether an advance is really a loan.
No, and the difference matters. A fixed debit with a reconciliation clause the funder honours behaves like a holdback. One where reconciliation is never actually performed looks, to a court, like a loan with a fixed repayment schedule — which is the argument that has cost funders judgments.
Holdback
The percentage of daily card sales or bank deposits a funder takes until the advance is repaid.
Reconciliation
The contractual process by which a merchant can have their remittance adjusted when actual receipts fall short of what was projected.
ACH remittance
Repayment collected by scheduled debit from the merchant’s bank account rather than as a split of card receipts.
Recharacterisation
A court or regulator determining that a transaction structured as an advance was, in substance, a loan.
Negative days
Days on which a merchant’s bank account carried a negative balance.
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