Your merchant cash advance agreement should have a specified percentage of your receipts that the funder purchased, and which they are supposed to take until the amount they purchased is paid in full. The fixed amount they debit daily (or weekly) should be an estimate of that percentage applied to the receipts they assume you’ll earn.
How do I know what the specified percentage is in my MCA agreement?
It’s usually at the top of the first page or schedule, next to the purchase price and the amount purchased. In the Cedar Advance agreement, which Cedar filed with the Securities and Exchange Commission, the specified percentage is 20%. The agreement defines it as “the percentage of Receivables ... to be delivered until the Receivables Purchased Amount is paid in full.” Funders and brokers may call it the holdback, holdback percentage, retrieval rate, or remittance percentage. California’s disclosure rule calls it the split rate.
If the specified percentage in my MCA is 15%, why do they debit my account for the same amount every day?
Most funders do not take a cut of each sale; they debit a fixed amount which is intended to approximate the specified percentage of your receipts. The Cedar Advance agreement acknowledges that the weekly payment of $16,594 “is intended to be an approximation of no more than the Specified Percentage, subject to reconciliation.” As Mondaq’s summary of New York appellate decisions on revenue purchase agreements explains, the payment is an estimate of the specified percentage of “the merchant’s average daily, weekly or monthly receivables in the period prior to funding.” So the equation is: payment = specified percentage x assumed receipts.
How do you figure out the receipts the funder assumed?
To find the receipts the funder was assuming, you simply divide the fixed payment by the specified percentage. Here are the assumed receipts for three real merchant cash advance agreements (the arithmetic is ours):
| Agreement | Specified percentage | Fixed payment | Implied receipts | Purchased amount divided by payment |
|---|
| Cedar Advance | 20% | $16,594/week | $82,970/week | 45.0 weeks |
| Oakshire v Argus | 15% | $2,935.71/day | $19,571.40/day | 189.00 business days |
| LG Funding | 15% | Capped at $2,499/week | Cap binds above $16,660/week | About 51.7 weeks at the cap |
With the Oakshire agreement, the purchased amount of $554,850 divided by the fixed payment of $2,935.71 gives a term of exactly 189 business days, and in Oakshire Props., LLC v Argus Capital Funding, LLC the Fourth Department concluded the fixed payment was set to ensure the funder’s “targeted return would be met in a predetermined period of time as opposed to having been set based on the specified percentage.”
If you signed a disclosure under New York’s rule for sales-based financing of $2.5 million or less, it should show the estimated term based on the funder’s assumption about your income. See 23 NYCRR 600.6(h). The rule generally requires four to twelve months of your historical income. See 23 NYCRR 600.8(b)(2). California uses the same four to twelve months. Compare the income they assumed to your actual income.
How do you calculate what you should be paying?
Multiply your actual receipts by the specified percentage, then compare that figure to the amount the funder actually took. You’ll need to:
- Obtain your bank statements from the date of the agreement. A merchant requesting reconciliation under the Cedar Advance agreement must provide “bank statements covering the period from the date of this Agreement through the date of the request.”
- Total the deposits you made that are part of “receipts” under the agreement.
- Multiply the total receipts by the specified percentage to get what the funder should have taken.
- Total the debits the funder took over the same period.
- Divide the total debits by your total receipts to get the percentage of your receipts the funder actually took.
Let’s say you took out a $100,000 advance with a 1.3 factor so you owe $130,000. The contract says you’ll pay 15% (“specified percentage”) and they’ll debit your account for $1,500 per business day based on expected daily sales of $10,000. But your sales drop to $6,000 per day, and 15% of that is $900. That means you’re overpaying by $600 per business day, or about $12,600 for a 21-business-day month. If your actual percentage is well above the contract number, send a letter asking for reconciliation under your contract’s reconciliation clause. (Our guide on using a reconciliation clause to reduce payments covers exactly what to send.)
Does a lower payment reduce what you owe?
No, it will just lengthen the time until the advance is paid off. The funder purchased a fixed amount, so collecting less each day means the advance stays outstanding longer. In the example above, the last $65,000 takes 43 business days at $1,500 per day and 72 at $900. That’s why the term isn’t set in the contract; it’s the purchased amount divided by the payment amount.
Why does the specified percentage matter if a dispute comes up?
Courts look at whether the payments are based on the specified percentage to decide whether the advance was a purchase of receivables or a loan. In People v Richmond Capital Group, the First Department held in February 2026 that the transactions were loans because the “daily payments were fixed and did not represent a good faith estimate of receivables.” By contrast, in Apollo Funding, the Second Department held that a merchant could not claim the reconciliation clause was illusory where the merchant never invoked it. For more information, see What is a reconciliation clause and why does it matter?
Frequently Asked Questions
What receipts should I use to calculate the specified percentage?
Check how your contract defines “receivables.” Under Cedar’s contract, receivables are defined as payments made “in the ordinary course” of the merchant’s business. Merchants often question whether internal transfers and loans belong in that base, and your contract controls the answer.
Should I divide my receipts by calendar days or business days?
Divide by the days on which you are actually debited. ACH debits usually run on business days only. At 10% of $100,000 in monthly receipts, dividing by 30 calendar days gives $333, but dividing by 21.67 business days gives $461. Put another way, if you’re being debited $333 per business day, the funder is only getting 7.2% of your $100,000 receipts.
Won’t reconciling to the specified percentage increase my payments?
Yes, if you have a contract like Cedar’s. Under Section 4 of Cedar’s agreement, if the funder collected too little, it can debit your account for “all additional amounts” it is owed and can also increase the estimated payment amount. The funder can initiate this on its own.
What if I have more than one MCA?
Calculate each one and add them together. If you have three advances for 15%, 12%, and 10%, the funders will receive a total of 37% of your deposits.