The most common MCA repayment structure: a fixed daily ACH debit pulled from your business operating account every business day until the total payback amount is reached. Two other structures exist (weekly ACH, % of card sales), but daily ACH dominates the market. Below: how each works, when each fits, and how to think about the cash-flow impact.
Structure 1: Daily ACH (the most common)
The funder calculates a fixed daily payment based on total payback divided by expected business days in the term.
Example: $50,000 advance × 1.30 factor = $65,000 total payback. Over a 7-month (~150 business day) term: $65,000 ÷ 150 ≈ $435 per day.
That $435 hits your business account Monday through Friday. No weekends, no banking holidays. Once the total $65,000 is collected, the debits stop.
Pros: predictable for both parties, simplest contract structure, fastest underwriting.
Cons: rigid — doesn't flex with revenue. Slow business days hurt more than strong ones help.
Structure 2: Weekly ACH
Same total payback, but pulled weekly instead of daily. Same example becomes ~$2,167 weekly over ~30 weeks.
Less common because some merchants find weekly debits more cash-flow-disruptive than smaller daily ones. But for businesses with weekly billing cycles or weekly cash flow rhythms (some service businesses, some construction trades), it can fit better.
Structure 3: % holdback (split funding)
Instead of a fixed dollar amount, the funder takes a fixed PERCENTAGE of your daily card-sales revenue (or sometimes total bank deposits). Typically 8-15% of card sales.
Example: $50K advance × 1.30 factor = $65K payback. If you hold 10% of daily card sales and your card sales average $4,000/day, the funder takes $400/day on average. Slow days = less. Strong days = more.
Pros: flexes with revenue, less catastrophic on slow weeks. Helpful for highly seasonal businesses.
Cons: fewer funders offer it, requires merchant-account integration, total term length is variable.
What happens during slow periods
Fixed daily ACH doesn't reduce automatically when revenue dips. If you have a slow week and your operating account dips, the funder still pulls the $435 every day. If the account doesn't have funds, the ACH returns and triggers the missed-payment escalation chain (returned-item fee, eventual collection call after 3+ returns in 7 days).
The two paths to relief during a slow period:
- Reconciliation provision. Some MCA contracts include language that lets you request a temporary daily-payment reduction if revenue drops below a threshold. Most contracts have this; few merchants know to use it. Read your contract; document the revenue dip; request a 30-day reduction.
- Workout call. Even without a formal reconciliation, calling the funder's collections desk BEFORE missing a payment usually opens options. Funders prefer paid-down deals over defaults; they have authority to temporarily reduce daily payments, switch you from daily to weekly, or pause for 5-7 days.
Term length is approximate, not exact
"7-month term" or "150 business days" is an estimate based on the daily payment math. Real-world variables shift it:
- Banking holidays and weekends don't pull, so the calendar drags slightly
- Returned ACHs add back to the tail (your missed payment isn't forgiven, it just slides the end date)
- Reconciliation reductions extend the term
- Early payoff (where the contract permits) can shorten it with sometimes a discount on the factor
So a "7-month term" can become 7.5 or 8 months in practice. The total payback amount is fixed; the time to get there flexes a little.
Reading the daily payment in cash-flow terms
The right way to evaluate the daily payment isn't as a dollar amount in isolation — it's as a percentage of your daily revenue.
- Daily payment ≤ 8% of average daily revenue: comfortable
- 8-12%: standard zone
- 12-15%: stretching, watch for slow weeks
- Over 15%: risky, default probability rises
If your $80K/month business is paying $619/day on a $100K advance, that's roughly 19% of your average daily revenue. That's the wrong sizing — too much daily pressure for the cash flow. Either resize the advance down or extend the term if the funder allows.
What stops the debits
Daily ACH stops when the total payback amount is reached. The funder's bank-side ledger tracks cumulative collected; once it hits the contracted total, the next day's debit doesn't run. Some funders auto-confirm this with a wire-confirmation email or a portal notification.
Verify your contract is paid off by requesting a payoff letter from the funder. Don't assume the absence of a debit means closure — confirm in writing and check that any UCC-1 lien filed at funding gets a UCC-3 termination filed within 30 days of payoff.
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.