MCAs repay in one of two structures: a percentage of credit card sales (split-funding) or a fixed daily ACH withdrawal. The choice depends on the business's revenue mix, the funder's product offerings, and which structure better matches the merchant's cash flow.
Both structures price similarly on factor rate. The difference is in how the daily payment is calculated and how it responds to revenue volatility.
Structure 1: Percentage of Card Sales (Split-Funding)
Also called: Holdback, percentage of receivables, split-funding, lockbox.
How it works: The merchant's credit card processor (Stripe, Square, First Data, Worldpay, etc.) is set up to automatically forward a fixed percentage of every credit card transaction to the funder. The merchant receives the rest.
Typical percentage: 8-15% of card sales. So a $1,000 transaction routes $100-150 to the funder, $850-920 to the merchant.
Best for:
- Restaurants, retail, gas stations, salons — businesses where 80%+ of revenue is credit card
- Businesses with high revenue volatility (seasonal, event-driven)
- Merchants who want repayment to flex with revenue automatically
Cash flow advantage: Slow days mean smaller payments. Strong days mean larger payments. The percentage stays fixed; the dollar amount flexes with revenue.
Cash flow disadvantage: Strong revenue extends payback faster, but the merchant doesn't get to control timing. Some merchants find the variable daily settlement amounts harder to budget.
Structure 2: Fixed Daily ACH
Also called: Daily debit, fixed daily withdrawal, ACH-based MCA.
How it works: The merchant authorizes the funder to withdraw a fixed dollar amount via ACH from the business bank account on each business day (usually weekdays only — 21-22 withdrawals per month).
Typical amount: Calculated as expected total payback divided by business days in the term. A $50K advance at 1.30 factor over 6 months: $65K total payback ÷ ~130 business days = ~$500/business day.
Best for:
- Businesses with mixed revenue sources (cash, ACH, checks, cards)
- Service businesses, B2B, professional services, contractors
- Merchants who want predictable, budget-able payments
Cash flow advantage: Same dollar amount every day, easy to budget. Most merchants prefer the predictability.
Cash flow disadvantage: Slow days don't reduce the payment. If revenue drops, the fixed daily payment becomes a higher percentage of revenue, which is when reconciliation becomes important.
Side-by-Side Comparison
| Feature | % Card Sales | Daily ACH |
|---|---|---|
| Payment amount | Variable, % of card revenue | Fixed dollar amount |
| Payment frequency | Daily (every business day) | Daily (every business day) |
| Slow day impact | Smaller payment | Same payment |
| Strong day impact | Larger payment | Same payment |
| Term length | Variable (depends on revenue) | Fixed at signing |
| Setup | Requires processor integration | Just bank account ACH auth |
| Best for | Card-heavy businesses | Mixed-revenue businesses |
| Reconciliation needed | Less often (auto-flexes) | More often (when revenue drops) |
Worked Example: $50K Advance, 1.30 Factor
Business A: Restaurant, $300K monthly revenue, 90% card sales
Split-funding at 12%: 12% of $270K monthly card revenue = $32,400/month to funder. $65K payback / $32,400 monthly = ~2-month payback during peak season. During slow months ($200K total revenue, $180K cards), $21,600/month = ~3-month payback.
Daily ACH alternative at 1.30 factor over 6 months: Daily payment ~$500. Monthly burden ~$10,800. Lower monthly burden, longer term. May actually fit a restaurant better despite the structural mismatch with split-funding.
Business B: HVAC contractor, $200K monthly revenue, 30% card sales
Split-funding at 12% of card sales: 12% of $60K card revenue = $7,200/month to funder. $65K payback / $7,200 monthly = ~9-month payback. The math doesn't work for split-funding because card revenue is too small.
Daily ACH at 1.30 factor over 6 months: Daily payment ~$500. Monthly burden ~$10,800 (5.4% of revenue). Manageable and fits the mixed-revenue model.
Which Should You Choose?
- If 70%+ of revenue is credit cards and revenue is volatile: split-funding usually fits better
- If revenue is mixed across cash, ACH, checks, cards: daily ACH is more practical
- If you prefer predictable budgeting: daily ACH
- If you can't easily change processors: daily ACH avoids the processor integration step
- If your funder offers both: pick the one that better matches your revenue profile
Westline's Approach
We offer both structures. Default is daily ACH for most merchants because it's the simpler integration and fits the broadest range of businesses. We offer split-funding for restaurant, retail, and high-card-volume merchants who specifically request it. Both price at the same factor rate; the structure choice is operational, not financial.
Sources & References
- Bank denial and small business credit access figures cited in this piece are derived from the Federal Reserve Small Business Credit Survey. Approval rates for small business credit applications at large banks have ranged from approximately 13%-31% across recent survey years, depending on bank category and reporting period.
- Small business finance landscape and lending program data: SBA Office of Advocacy.
- Merchant cash advance industry standards and disclosure practices: Small Business Finance Association (SBFA).
- Commercial financing disclosure regulations referenced (NY FAIR Act, CA SB 1235/666/362, VA, UT) are summarized from the published statutes; consult counsel for specific compliance application.