Redrun Business Funding, a small-business funding broker in Caldwell, Idaho, explains merchant cash advances for Canyon County owners and arranges them through funding partners. An advance is not a loan: a funder buys part of your future receipts and collects them through a holdback or fixed remittance. This page covers factor rates, reconciliation, stacking and default. Partners decide and set terms.
| What it is | Future receipts sold forward; no loan |
|---|---|
| Collection | A holdback share of sales or a fixed remittance |
| Priced by | A factor rate: a multiplier, not an interest rate |
| Decided by | A funding partner, not Redrun |
The parts of an advance agreement
The funder agrees a purchase price (the money you receive) and a purchased amount (the receipts it will collect). The gap between those two numbers is what the advance costs. Because the funder is buying receipts, not lending money, there is no interest rate and no fixed term; how long collection takes depends on your sales.
Holdback and remittance
Collection works in one of two ways. With a holdback, a set percentage of each day's card or bank receipts goes to the funder until the purchased amount is collected. With a fixed remittance, a set amount is debited from your account each business day or week, sized to approximate that percentage of expected receipts.
Reconciliation
If sales fall, a fixed remittance can take more than the agreed share of receipts. Many agreements let you ask for reconciliation: the funder compares what it collected with the agreed percentage of your actual receipts and adjusts. Find the reconciliation clause, how to request it and what records it needs before you sign.
Reading a factor rate in dollars
Advances are priced with a factor rate, a multiplier applied to the purchase price to give the purchased amount. A factor rate is not an annual percentage rate, and the two cannot be compared directly. Because collection can be fast when sales are strong, the effective cost over a year can be much higher than the factor rate suggests.
To compare an advance with a loan, look at the total dollars you will hand over and how quickly. Redrun lays that out for you before you decide.
Merchant cash advance example
Hypothetical figures, for illustration only: a funder pays a Canyon County cafe $20,000 and buys $26,000 of its future card receipts, a factor of 1.3. With a 10% holdback, it collects one-tenth of each day's card sales until $26,000 has been collected. On a strong month that happens faster; on a slow one, slower. The cost is $6,000 whichever way it goes. These numbers are not an offer, and real terms are set by the funder.
Stacking
Stacking means taking a second advance (or more) while the first is still being collected. Each funder takes its own share, so the combined bite out of daily receipts can grow quickly. Plenty of agreements ban a second advance outright, or count it as a breach. Tell any new funder about advances you already have.
Credit reporting and default
Owners often ask whether merchant cash advances report to credit bureaus. Practice varies between funders; many do not report regular collection, but some check credit at the start, and collection actions after a default can show up. Ask the funder, and file its answer in writing with the agreement.
Read the default clause closely. It sets out what counts as a breach (for example, switching bank accounts or closing the business) and what the funder may then do.
Are merchant cash advances a genuine product or a scam?
Advances are a real product offered by real funders, and they can suit a business with steady card sales and a short need. They can also be expensive, and terms vary widely. Treat any funder that promises approval, pressures you to sign the same day or asks for money before an offer with caution, and read every page of the agreement.
Questions to ask an advance funder
- What will I receive, and how much of my receipts is being bought?
- Will you take a share of sales or a fixed debit, and on what schedule?
- How do I request reconciliation, and what records are needed?
- Does early payment reduce the amount owed?
- Which slip-ups put the agreement in default, and with what result?
When an advance is worth comparing
Owners consider an advance when a loan is not available or would take longer than the need allows. Before choosing one, compare it with working capital financing, which is a loan with a fixed schedule. The request steps explain how Redrun lays offers out, the sector overview notes which sectors tend to have the card sales an advance relies on, and the Caldwell, ID page gives the local business picture.
By Redrun Business Funding · Updated
