Merchant Cash Advances for Port Orange, FL Physician Offices: Costs, Holdbacks and Alternatives

The difference between a merchant cash advance and revenue-based financing is where the share comes from; each takes a share of what the business brings in. A merchant cash advance collects a percentage of card sales. Revenue-based financing collects a percentage of total revenue, which includes insurance payments, checks and bank transfers, until an agreed amount has been collected. Contracts differ, and some revenue-based products are written as loans, so the agreement decides what the product really is.

For a therapy office the difference is the money each one draws from. If insurers pay most of the clinic's visits by electronic transfer and patients put only co-pays on cards, a card-based advance has a thin stream to collect from, while a revenue-based product would take a share of the insurance deposits too. Either way the office gives up a slice of incoming money until the total is collected, which is worth comparing with a fixed payment.

So in this invented case the credit line comes out $8,363 cheaper than the advance. The line asks more of the practice up front, since a partner reviews statements and credit, while the provider of an advance can look mainly at card volume. For a dental office that already has a business line of credit, drawing on it is the first of the alternatives to price against an advance.

1. After reviewing several months of card processing statements, the provider offers a sum.
2. The offer states the factor, which sets the total to be collected, and the holdback, the share of each card settlement it takes.
3. The dental office receives the sum, and from then on the holdback comes out of card settlements automatically.
4. Collection continues until the agreed total has been collected; there is no interest rate and no fixed end date.

Illustration only, invented figures: with $39,600 to be collected, card sales of $1,800 a business day and a holdback of 12%, the provider takes $216 a day, and collection runs about 183 business days (the last, partial amount comes on day 184). If card sales fall, the daily amount falls and collection takes longer; if they rise, it ends sooner, at the same total cost.

The factor rate is the number a sum is multiplied by to get what the provider will take in. A factor of 1.28 on a sum of $20,000 means $25,600 is collected, so the advance costs $5,600. The factor is not an annual interest rate: the dollar cost is fixed, whether the total is collected in six months or in twelve.

That is why a short collection period makes an advance expensive in annual terms. For a child care center that takes tuition by card, a strong month speeds up collection without lowering the cost. Holding the factor next to the cost of a working capital loan over the same period shows the difference in dollars.

No. Under a merchant cash advance a provider buys future card receipts rather than lending: the provider buys a share of sales that have not happened yet, and the business sells it. There is no interest rate, and the collection amount moves with card volume rather than following a fixed schedule.

For a landscaping crew that is paid by check or bank transfer from homeowners associations and property managers, there may be few card sales to sell. A crew in that position can look first at working capital or a credit line, and the difference in how each is treated legally and for taxes is a question for the crew's own advisers.

The holdback rate is the percentage of each card settlement the provider keeps. With a split holdback, the card processor sends that share to the provider and the rest to the business. Other providers pull a set amount from the bank account each day or week and true it up to real sales when asked.

Illustration only, invented figures: a Volusia County, FL child care center with a 10% holdback hands over $120 on a day with $1,200 of card sales and $80 on a day with $800. Under a fixed debit, the center pays the same amount either way until it asks the provider to reconcile, so the agreement's reconciliation terms matter. All six funding types sit side by side on one page, and an advance request can begin on the request form like any other. Loan types by trade are on the practices and trades page, and ZIP 32127 business counts on the Port Orange, FL page.