Merchant Cash Advance Glossary
Plain-English definitions for the MCA terms you will see in applications, offers, contracts and underwriting.
ACH
Automated Clearing House. A U.S. electronic network often used for business-account deposits and withdrawals.
Advance amount
The upfront amount of capital associated with an MCA transaction before any deductions or payoffs.
Average monthly revenue
An average of business revenue over a stated period, commonly reviewed during underwriting.
Bank verification
A process used to confirm the business operating account, account ownership and/or transaction data.
Broker
An intermediary that may help businesses identify and submit applications to commercial funding providers.
Buyout
A transaction in which new financing is used to satisfy an existing financing balance.
Chargeback
A reversal of a card transaction that can affect net processing volume and underwriting.
Daily remittance
A payment or remittance amount collected each business day under certain MCA structures.
Default
A contract-defined event that may trigger remedies if specified obligations are not met.
Factor rate
A multiplier used by some commercial financing products to calculate a simple total payback or purchased amount.
Fixed ACH
A scheduled ACH withdrawal of a fixed amount, subject to the terms of the agreement.
Funding amount
Common shorthand for the amount provided to the business; review the agreement for the precise legal term.
Holdback
Often used to describe the percentage of card or receivable volume withheld or remitted in a percentage-based MCA structure.
MCA
Merchant cash advance. A commercial financing arrangement generally structured around the purchase of future receivables.
Net proceeds
The cash that reaches the business after disclosed fees, payoffs or other deductions.
Negative day
A day when a business bank account ends below zero or otherwise reflects a negative balance.
NSF
Non-sufficient funds. A transaction that cannot be completed because available account funds are insufficient.
Offer
A proposed commercial financing structure. It is not final until required agreements and conditions are completed.
Origination fee
A disclosed fee that may be deducted from proceeds in some financing transactions.
Payoff amount
The amount required to satisfy an existing obligation as of a specified date.
Position
Industry shorthand sometimes used to describe the sequence or relationship of multiple MCA obligations.
Purchased amount
The agreed amount of future receivables purchased under an MCA agreement.
Purchased percentage
The contract percentage of receivables associated with a percentage-based remittance structure.
Reconciliation
A contract process that may adjust remittance to reflect actual receivables, subject to agreement terms.
Renewal
A new transaction that may satisfy a remaining balance and provide additional net capital.
Revenue-based financing
A broad category of financing where repayment or remittance is tied in some way to business revenue; structures vary.
Split funding
A payment-processing arrangement in which an agreed share of receipts is routed toward remittance.
Stacking
Industry shorthand for having multiple MCA obligations outstanding at the same time.
Stipulations
Documents or conditions requested before a commercial funding transaction can close.
Term
The expected or stated duration associated with financing. Some MCA agreements are not structured as loans with a fixed maturity.
Total payback
Common shorthand for the total dollars expected to be remitted under a financing structure; use the agreement’s exact terminology.
UCC-1
A financing statement filed under the Uniform Commercial Code that can provide public notice of a secured party’s interest.
Underwriting
The review process used to assess business information and determine whether, and on what terms, a provider may make an offer.
Verification call
A call or process used to confirm business, owner, bank or transaction information.
Weekly remittance
A payment or remittance collected once per week under certain structures.
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