Merchant Cash Advance Glossary

Updated: Nov 10

Whether new to the merchant cash advance industry or a veteran who may train or manage others in the industry, we present to you a glossary of the most common terms in MCA. We decided to do this after we searched and couldn't find a great glossary online although some MCA companies might keep a glossary for internal use only.


These aren't considered legal interpretations of any of the terms by any stretch, so just to note please do not consider using any in legal documents unless consulting an attorney. Actually in some examples you might notice a little humor as working in this industry one is needed sometimes.


If you have some terms that we may have missed, would appreciate for you to leave comments below!

Glossary in Merchant Cash Advance


ACH - stands for Automated clearing house. which is the way transactions are processed between banks, typically taking 1-2 days.


ADB - Average Daily Balance, a key metric which is calculated when underwriting bank statements.


Broker - a sales representative that sells business financing products such as MCAs, loans and lines of credit.


Buyer - in a mca contract the buyer is the funding company who is buying future receivables from the seller.


Buy Rate- The factor rate that a funder will go no lower than and the broker is at zero commission.

Ex: broker says to funder, "I have an offer with a lower buy rate, can you drop your rate BUT I'm still going to upsell 15 points??"


CC Split - Credit Card split, is a merchant cash advance where the structure of paying back the money is in agreeing to split the gross sales from credit card processing to a fixed % that goes to the buyer and seller of the future receivables. This is typically used when there is a high volume of credit card sales when compared to regular bank deposit revenue. This is not a loan.


Clawback - when a commission is required, per ISO agreement, to be paid back from the broker because of a default by the merchant within agreed upon time.

Ex: Funder," Hi Joe, your 100K deal that funded last week which you said the guy was a perfect payer closed his bank account and won't pay, so we are going to have to clawback the $10k commission."


COJ - Confession of Judgement, is a written agreement, signed by the

defendant(merchant), that accepts the liability and amount of damages that was agreed on, specifically used in only certain states in case of a default on a merchant cash advance

Ex: Almost everyone rejoiced when COJs were banned in NY besides certain funding companies who depended on them.


Debt Service - The total outstanding debt payments that a business is obligated to payback.


Default - when a merchant violates their contract with their funding company. Terms of default vary by funder.


Double Funding - typically used in the same manner as stacking(see below), but many think of this as a mca funding within a very short time of another mca funding, typically 1-7 days, which is more deceiving and can be considered a default and clawback of commission if same broker proven to be the source of the second funding.


Early Payoff Discount - an amount that is calculated at the time of contract to reduce the cost of the advance if paid early according to the terms disclosed.


Factor Rate- the cost applied to a merchant cash advance or other factoring product where the amount of money approved to advance is multiplied by this cost or discounted in the case of an mca.

Ex: Factor rates at zero commission range from 1.09 to 1.49.


Funder - a funding company that provides a Merchant Cash Advance, which is not a loan and therefore not a lender.


Holdback - is the % amount set in a credit card split agreement in which that amount goes to the buyer of receivables.

Ex: A 15% holdback(HB) would mean the funder is getting 15% of the total credit card sales each batch.


ISO - Independent Sales Organization, which is a company that operates to sell MCAs along with other loan products and employees brokers and other personnel.

Ex: See our Top 10 ISO list


Lockbox- 3rd party bank account where funds from payment processor are held.


Merchant Cash Advance (MCA) - the sale of future receivables at a discount(by upfront payment) where the payback is either by a set daily/weekly ACH payment or by splitting the business owners credit card sales at a fixed percentage. It's not a loan.


Payoff Letter - a letter from a funding company that provides the amount to pay the balance in full.

Ex: "The merchant says the other funder won't give him the letter, can you fund him anyway??"


Payback Months - term used when requesting the bank statements from the previous year that would be coming up during the payback period of the advance being offered.


Percentage of Gross - percentage of total relevant debt service payments paid monthly divided by the gross sales deposits per month


Points - are the percentage that is added to the factor rate for commission. 1 point is 1% of the total advanced amount.


Position - derives from the legal place in hierarchy a debtor has to collect according to any UCCs filed on a business. In every day use in MCA its known as any advance that a merchant has where 1 MCA would be 1 position, 2 mcas would be 2 positions and so on.


PSF - Professional Service Fee, a fee some brokers charge merchants for their service.

Ex: Most funders won't allow an exorbitant PSF fee, which could be 3-5%


Purchase Price - is the advance amount


Purchase Amount - is the total payback amount


Remittance - The percentage of sales that is being withdrawn from the business bank account daily or weekly. There are other synonymous terms like 'pull'.



Renewal - When a merchant takes another advance from the same funding company at a point when eligible. Renewals are where the most profit is made.


Seller - is the merchant who is selling his future receivables to the buyer.


Sell Rate - The total factor rate at which the broker has their commission added in, which would also be the rate reflected in the contracts.


Stacking - Refers to the funding of an additional advance behind one or more already existing advances. Often times this can be considered a default to the existing merchant advance agreement.


Stips - Stipulations that are required to close on the advance. They include documents and other key information.

Ex: "Why so many stips, I had another offer with less"


Syndication- is a program that direct lenders offer to some ISOs to invest their own capital into their own cash advance submissions.


Term - the scheduled time in months or payments in which the client has to pay back the mca. Earlier years sometimes referred to as 'turn'.


True-up - its the reduction of payment amounts being made to the funding company to more accurately reflect ability to payback based on sales, which is required for all MCA products.


UCC - the Uniform Commercial Code has been called “the backbone of American commerce”. Its a comprehensive set of laws governing all commercial transactions in the United States. A UCC filing is used to stake a place in line to collect a debt.


Usury - is the act of lending money and requiring repayment at an exorbitant interest rate above the legal cap


ZBL - Zero Balance Letter

Ex: We will need a ZBL from 'ABC Funder' before we can complete funding"




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