An MCA has no monthly bill and no due date. The purchased amount is collected continuously, in one of two ways, and which way your agreement uses decides how the advance feels month to month — and what rights you hold when sales fall. This page covers the motion, not the price (pricing lives in MCA factor rates explained): the two remittance structures, the reconciliation mechanism that connects them to reality, and the routine that keeps a fixed debit honest.
General information, not financial or legal advice. Your agreement’s wording governs your rights; where this page quotes clause language, it is to help you find the corresponding language in your own contract.
Under a holdback structure, your card processor diverts the specified percentage of every batch of card receipts to the funder before the remainder settles to your account. The percentage — also printed in contracts as the retrieval rate — most often sits between 10% and 20% of receipts. On $3,000 of card sales in a day, a 15% holdback sends $450 to the funder and $2,550 to you.
The defining property is that this structure self-adjusts: a slow day remits little, a dead day remits nothing, a record day remits a lot. There is no payment to miss. What the merchant gives up is predictability of a different kind — a fixed slice of gross receipts leaves before rent, payroll or inventory see a cent, in good months and bad ones, until the purchased amount is complete.
Many agreements instead take a fixed daily or weekly ACH debit, sized as the specified percentage multiplied by projected receipts. Projection is where the trouble starts: the debit is calibrated at signing, from the sales the funder expects, and then it runs at that size whether your actual receipts match the projection or halve. A debit built on $60,000 of projected monthly receipts keeps taking its roughly $277 per business day (at a 10% specified percentage) through a $35,000 month without blinking.
Debits run on banking days — about 21 to 22 a month — not calendar days, which is why totals surprise merchants who multiply by 30. And unlike the holdback, a fixed debit can fail: a rejected debit is, under most agreements, an event of default after very few occurrences, which is the exposure detailed in MCA default.
Reconciliation is the contractual mechanism that closes the gap between projected and actual. In substance it says: the merchant sends bank and processor statements; the funder compares the specified percentage of actual receipts against what was actually taken; future debits are adjusted — or excess amounts refunded — so the remitted share matches the contract percentage of real sales. For a fixed-debit MCA, it is the only self-correcting feature the product has.
Two things decide whether yours is real. The wording: a mandatory clause (“the funder shall reconcile”) is enforceable machinery; a discretionary one (“the funder may, at its sole discretion, reconcile”) is a courtesy — and in Davis v Richmond Capital (1st Dept 2021), allegedly discretionary-and-refused reconciliation was central to the merchants’ claim that the deals were loans in disguise. The initial estimate: debits are supposed to be a good-faith estimate of the specified percentage of expected receipts; a debit sized far above any plausible reading of your statements was arguably never an estimate at all. The legal weight of all this is summarised in the box below; operationally, what matters is the routine.
Most merchants never run step 2, which is why oversized debits persist for entire terms. If sales have fallen since signing and your debits have not, reconciliation is the first lever to pull — before negotiation, before any relief company, and before touching the debit itself; blocking debits without a contractual basis is the one move that converts a pricing problem into a default. The full exit sequence that uses this lever is in how to get out of a merchant cash advance.
Three ordinary business decisions void the self-adjusting property — and typically constitute events of default in their own right: switching card processors without the funder’s consent (the split agreement lives at the processor), depositing card receipts into a new account, and steering sales away from the remittance channel (cash-only pushes, moving volume to a different platform). Funders monitor for all three. A merchant considering any of them mid-term should read the default clause first, not after.
Under a holdback, a month with no receipts remits nothing — painful, but no default arises from the remittance itself. Under a fixed debit, the debit keeps arriving against an empty account unless reconciliation or a written modification stops it; that asymmetry, in a bad season, is the difference between the two structures in practice. Neither structure forgives the purchased amount: both merely change when the same total is collected.
Why the clause matters beyond arithmetic. New York’s courts, deciding whether an MCA is really a loan, ask first whether reconciliation is mandatory and honoured in practice — before the finite-term and bankruptcy-recourse factors. A funder who refuses to reconcile is not just over-collecting; on the case law, it is arguing its own product out of its legal shelter. The full test, and the judgments it has produced, are in the merchant cash advance hub.
What is a holdback percentage? The fixed share of your receipts the funder takes under a split-withholding agreement — most often 10–20% of card sales, diverted by your processor before the rest settles to you. It is the throttle on the whole product: it sets how fast the purchased amount is remitted, and therefore how expensive the advance is per year.
What is a retrieval rate? The same thing by its other contract name: the percentage of receipts the funder retrieves as remittance. Contracts use “specified percentage,” “holdback” and “retrieval rate” interchangeably; when comparing your agreement to any explainer, match the definitions, not the vocabulary.
How are merchant cash advance payments calculated? Under a holdback, each day’s payment is the specified percentage of that day’s receipts. Under a fixed debit, the payment is set at signing — the specified percentage applied to projected receipts, divided across business days — and stays fixed until reconciliation or a written amendment changes it. Either way, payments continue until the fixed purchased amount (advance × factor rate) is fully remitted.
Do MCA payments adjust when sales drop? Holdback payments do, automatically, because they are a percentage of actual receipts. Fixed debits do not adjust themselves at all — the adjustment mechanism is reconciliation: you submit statements showing actual receipts and claim the difference under the contract clause. If your agreement makes reconciliation discretionary, or the funder refuses it, that gap between projection and reality stays in the funder’s favour unless you press it in writing.
General information, not financial or legal advice. Sources: LessOwe cluster 1.6 shared fact bank (2026-10-23) — holdback ranges per QuickBooks/Intuit and major explainers (Oct 2026); reconciliation’s legal significance per Davis v Richmond Capital Group, 194 AD3d 516 (1st Dept 2021) and LG Funding v United Senior Properties (2d Dept 2020). Currency verified 2026-10-23.