A merchant cash advance is not a loan: a funder buys a portion of a business's future receipts and collects a set percentage of them until an agreed total is remitted. Larkridge Funding Group, a small-business funding broker in Decatur, Illinois, explains holdbacks, factor rates and stacking to Macon County owners and introduces requests to funders, which make decisions and set terms.
| What it is | A purchase of future receipts, not a loan |
|---|---|
| Cost basis | A factor applied to the sum advanced |
| Collected by | A holdback percentage of card or bank receipts |
| Partners look at | Card processing and bank statements |
| Local context | 165 restaurants and eating places with employees in Macon County, IL (CBP 2023) |
| Who decides | The funder. Larkridge's job ends at the introduction |
| Address | 134 N Merchant St, Decatur, IL 62523 · (217) 296-7415 |
Not a loan: what is actually being sold
A merchant cash advance is not a loan. The business sells a portion of its future receipts to a funder for a sum paid now. The funder then collects an agreed share of the business's card sales or bank deposits until a set total, larger than the advance, has been remitted. Because it is structured as a sale, an advance is priced, collected and enforced differently from a loan, and the usual loan vocabulary of interest rate and APR does not describe it.
The holdback percentage
The holdback is the share of receipts the funder collects. If an agreement sets a 10 percent holdback (a hypothetical figure) and the business takes in $2,000 on a given day, $200 is remitted to the funder that day. Quiet days send less to the funder and busy days more. Some agreements instead collect a fixed daily or weekly amount from the bank account, with a process to adjust it if sales fall.
Ask which method the agreement uses, and how reconciliation works if receipts drop: who requests it, how often, and what records the funder needs.
The factor rate and the total collected
An advance is priced with a factor rate, a multiplier applied to the amount advanced. A hypothetical $20,000 advance at a factor of 1.3 means $26,000 will be collected in total. The factor does not change with time, so the faster receipts come in, the sooner the total is reached, and the higher the effective cost compared with a loan over the same period.
The simplest comparison is the total collected against the amount you actually receive after any fees. Put that next to the total cost of a working capital loan for the same amount, if one is available to you.
Advances and your credit file
Practice varies by funder. Many funders review the owner's credit when they consider an application, and some report to business credit bureaus while others do not. A default or a dispute can lead to collection activity that affects credit. Ask the funder directly what it checks at application and what, if anything, it reports.
Stacking: one advance on top of another
Stacking is layering a new advance or loan over one that is still being collected. Each holdback takes its own share of the same receipts, so two or three stacked advances can absorb a large part of daily sales. Many agreements forbid stacking without the first funder's consent. If you are already remitting to one funder, read that agreement before signing another.
When receipts stop: default
If a business stops remitting, closes its account or diverts receipts, most agreements treat that as a breach. Consequences can include the full remaining amount falling due, collection action and claims under any personal guarantee the owner signed. Agreements also differ on what counts as a breach and whether a genuine fall in sales is treated differently from a refusal to pay.
Restaurants, shops and advances in Macon County, Illinois
Advances are most often offered to businesses with steady card volume, which in Macon County means restaurants and shops above all. The county had 165 restaurants and other eating places with employees in 2023, 35 of them with fewer than five staff, and 326 retail employers (U.S. Census Bureau, County Business Patterns 2023). For a business that size, a holdback taken from every card sale can tighten cash quickly.
Before you sign, run through the questions to ask a funding partner. Sector notes are on the industries page, county data on our Decatur, IL page, and our role on the full process.
By Larkridge Funding Group · Updated