This page compares the two ways a merchant cash advance is collected: a holdback percentage of daily sales, which falls when sales fall, and a fixed daily debit, which does not unless reconciled. The calculator works out the holdback case; the steps show the fixed debit by hand. A merchant cash advance is not a loan. Sandland Credit, a small-business funding broker in Grand Junction, CO, provides it as illustrative arithmetic only.
Which number goes in which box
- Advance amount: what the funder pays you, before any fees are deducted.
- Factor rate: the multiplier written in the offer. Advance multiplied by factor equals the total to be remitted.
- Holdback: the percentage of daily card sales the funder collects.
- Average daily card sales: your own figure, from processing statements.
The results show the total to be remitted, the cost of the advance in dollars, and an estimate of how many business days collection would take at your average sales.
Percentage of sales versus fixed debit
With a holdback percentage, collections move with sales: a slow day sends less to the funder and the advance takes longer to remit. With a fixed daily debit, the same amount leaves your account every business day, whatever you sold. Fixed-debit contracts usually include a reconciliation clause that lets you ask for an adjustment when sales fall, but you have to use it, and the terms vary.
A scenario, in plain arithmetic
Hypothetical only: $1,000 of purchased receipts still to be remitted, a 10 percent holdback, or alternatively a fixed debit of $50 per business day. These are illustrative numbers, not an offer.
| Daily card sales | Percentage method (10%) | Fixed debit | Fixed debit as a share of sales |
|---|---|---|---|
| $500 (normal day) | $50 | $50 | 10% |
| $250 (slow day) | $25 | $50 | 20% |
| $100 (very slow day) | $10 | $50 | 50% |
| $750 (busy day) | $75 | $50 | 6.7% |
On normal days the two methods match. In a slow stretch, the fixed debit takes a much larger share of what comes in, which is exactly when the business can least afford it. In a busy stretch, the percentage method finishes sooner. The total remitted is the same either way; what changes is timing and pressure on daily cash.
Working out a fixed-debit advance yourself
- Divide the total to be remitted by the fixed daily debit to get the number of business days.
- Divide the fixed daily debit by your slowest realistic daily sales to see the share of sales it would take on those days.
- Read the reconciliation clause: how to request an adjustment, what records are needed and how quickly it takes effect.
What the result leaves out
Fees deducted from the advance, weekly rather than daily debits, days with no sales, and the effect of any second advance are not included. The calculator shows arithmetic, not the funder's actual collection practice. Illustrative arithmetic only; funders set the factor rate and terms.
Before you accept an advance
Compare the total to be remitted with the total cost of a working capital loan or line of credit for the same need, and check that the collection method leaves enough cash on your slowest days. How merchant cash advances work covers stacking, default terms and personal guarantees.
By Sandland Credit · Updated