MCA Glossary
Key terms and definitions for merchant cash advances.
A
- Accounts Receivable Financing
- A type of financing where a business uses its outstanding invoices as collateral to receive immediate cash. Learn more →
- ACH (Automated Clearing House)
- An electronic funds transfer system used by MCA companies to withdraw daily or weekly payments directly from a business bank account.
- Advance Amount
- The total cash amount provided to a business by an MCA provider, which must be repaid with the factor rate applied.
- Annual Percentage Rate (APR)
- The annualized cost of borrowing expressed as a percentage. MCAs do not technically have an APR since they are not loans, but an equivalent APR can be calculated for comparison purposes. Learn more →
B
- Broker
- A third-party intermediary who connects businesses with MCA providers. Brokers earn commissions and may or may not disclose all available options. Learn more →
C
- Confession of Judgment (COJ)
- A legal document signed by the business owner allowing the MCA company to obtain a court judgment without trial if the business defaults. Banned in some states. Learn more →
D
- Daily Holdback
- The fixed or percentage-based amount withheld from daily revenues to repay an MCA.
- Default
- Failure to meet the repayment terms of an MCA agreement. Can trigger additional fees, legal action, or UCC lien enforcement. Learn more →
- Double Dipping
- When an MCA provider takes two payments in a single day, either intentionally or due to a processing error. Learn more →
F
- Factor Rate
- A multiplier (typically 1.1 to 1.5) applied to the advance amount to determine the total repayment. A factor rate of 1.3 on a $50,000 advance means $65,000 total repayment. Learn more →
H
- Holdback Percentage
- The percentage of daily credit card sales or revenue retained by the MCA company as repayment. Typically ranges from 10% to 25%. Learn more →
M
- MCA (Merchant Cash Advance)
- A financing option where a business receives a lump sum in exchange for a percentage of future credit card sales or revenue. Technically a purchase of future receivables, not a loan. Learn more →
R
- Retrieval Rate
- The percentage of daily sales that is automatically deducted to repay the MCA. Same as holdback percentage.
- Reverse Consolidation
- A strategy where a new MCA is used to pay off multiple existing MCAs, consolidating them into a single payment.
S
- Stacking
- Taking out multiple MCAs simultaneously from different providers. Considered high-risk as it multiplies daily payment obligations. Learn more →
U
- UCC Filing (Uniform Commercial Code)
- A legal filing that gives the MCA provider a lien on business assets. Used as collateral and recorded publicly. Learn more →