A merchant cash advance is a purchase of a business's future receipts, not a loan. Fieldcroft Business Capital, a small-business funding broker in Great Falls, Montana, can connect owners with funders that offer advances, but explains the full cost first. The funder reviews receipts, decides, and sets the factor rate and holdback.
| What it is | Future receipts sold; not a loan |
|---|---|
| Cost | Set by a factor rate on the advance |
| Collection | A holdback share of receipts, or a fixed debit |
| Term | Open-ended; runs until the purchased sum is collected |
| Funders review | Card and bank receipts |
| Decision | Made by the funder |
Selling tomorrow's receipts: why an advance is not a loan
With a merchant cash advance, a funder pays a lump sum now in exchange for a larger amount of your future receipts. You are selling receivables, not borrowing. The funder collects its purchased amount by taking a share of card sales or bank deposits until the total is remitted.
Because it is structured as a sale, an advance is not described with an interest rate, and the protections that apply to loans may not apply in the same way.
How the factor rate works
Cost is set with a factor rate, a multiplier on the advance. The formula is simple: advance multiplied by factor rate equals the total the funder collects. The gap between those two figures is what the advance costs.
To show the arithmetic only: a hypothetical $10,000 advance with a factor of 1.3 means $13,000 is collected, a cost of $3,000. That cost does not change whether collection takes four months or ten, which is why a factor rate cannot be compared directly with an annual rate on a loan. A short collection period makes the effective annual cost far higher than the multiplier suggests.
The holdback, collection and adjustment rules
The holdback is the percentage of daily receipts the funder collects. Some agreements take it straight from card settlements; others use a fixed daily or weekly debit estimated from average sales. With a fixed debit, ask about reconciliation: the right to have the debit adjusted to match actual receipts if sales fall. Read exactly how to request it and what records the funder needs.
Stacking and default
Stacking means taking a second advance before the first is fully remitted. Each funder collects its own share, so two holdbacks can take a large part of every deposit. Many agreements forbid stacking, and breaking that term can trigger default provisions.
Default terms in advance agreements can be severe, sometimes including personal signatures and confessions of judgment. Find and read those clauses first.
Where advances turn up in Cascade County, MT
Businesses with heavy card sales and thin documentation are the usual candidates. Cascade County, MT had 213 food service and drinking place employer establishments and 321 retail trade establishments in 2023 (County Business Patterns 2023). For many of them a working capital loan or a line of credit costs less; an advance makes sense mainly when speed matters more than cost and the other routes are closed.
Options to price before an advance
An advance is usually the costliest structure we discuss, so we price the alternatives first. A short working capital loan, a line of credit, or equipment financing for a specific purchase can each cover the same need at a lower total cost, if a partner will approve them.
Sometimes the answer is not funding at all: a supplier payment plan, a customer deposit on a large order, or a smaller purchase. Fieldcroft Business Capital would rather tell you an advance is a poor fit than place one that strains every deposit for months.
Reading the contract
Advance agreements are often long and written for the funder. Find these items before signing: the purchased amount, the specified percentage or fixed debit, the reconciliation clause, the events of default, any personal signature, and whether the funder may file a UCC statement. If any of them is missing or unclear, ask in writing and wait for the answer.
Five checks before signing an advance in Great Falls, MT
- Write down the purchased amount: the total the funder will collect.
- Estimate how long collection will take at your real daily sales.
- Check whether collection is a true percentage or a fixed debit, and how reconciliation works.
- Confirm whether stacking is prohibited and what counts as default.
- Compare the total cost with a loan quote for the same amount.
Owners using an advance to cover wages should also read our payroll post. Funders file UCC statements against receivables too, which the Montana UCC search guide explains. Our process page shows where an advance fits among the options, the county figures page gives local context, and the sector pages cover restaurants and retail.
By Fieldcroft Business Capital · Updated