Merchant Funding.


Merchant Funding.

Merchant Funding


Merchant funding is for companies that do not qualify for a traditional bank loan and require working capital to expand. While a merchant advance is primarily utilized by retailers, any company that accepts credit cards can apply for a merchant advance.

Merchant funding companies will take an average of six to twelve months credit cards receipts to determine the maximum amount of the loan. They will also work with the prospect to determine how quickly the loan will be repaid which they call the retrieval rate. If the business has a few years of merchant statements they can sometimes build a case to take seasonality into account.

Many retail businesses have a spike in sales at some point throughout the year in which period the loan will be paid back more aggressively as the merchant advance company is collecting a percentage of the daily credit card transactions. While it benefits the merchant advance company when sales are strong as the loan is repaid more quickly, the retailer gets the benefit when things are slow. This is unlike a traditional loan that would have a fixed amount due every month regardless of how the business performed.

Merchant Funding companies typically like to be repaid within twelve months and set the retrieval rate to 10 - 15% of the daily collections. Merchant funding companies take this percentage from the daily credit card receipts in order to pay back the loan.

The rate that merchant funding companies charge is called the factor ratio. Factor ratios vary between 1.15 all the way to 1.40 for riskier loans. The factor ratio is applied against the total loan amount to determine the payback amount. If a company borrows $100,000 at a factor ratio of 1.20 that total payback amount is $120,000.

While a merchant advance is expensive, some borrowers prefer merchant funding to traditional loans because of the structured payback through the daily credit card transactions. Merchant funding is a great way for companies that accept credit cards to generate working capital quickly.


Call us now at 855-424-2958 and get on the road to success! Or fax us at (855) 450-0885‚Äč.

Customized Financing Options


Asset Based Lending

Revolving lines of credit up to $20,000,000


Accounts Receivable Factoring

No minimums, up to $20,000,000


PO Financing

Secondary lines of credit for ABL or Factoring


Term Loans

Equipment & inventory facilities


Payroll Funding

Great for staffing & temp agencies

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