Holdback (merchant cash advance)

Holdback is the mechanism that makes a merchant cash advance revenue-linked. Instead of fixed monthly instalments, the provider takes a set share of each day's card sales (or, for some newer products, of platform receipts such as Shopify or Amazon settlements) until the total repayment — the advance multiplied by the factor rate — has been collected in full.

The benefit for the merchant is that repayments flex with trading. In a quieter week the absolute cash outflow is smaller; in a strong week it is larger. The drawback is that a higher-than-expected holdback can be cash-flow heavy, particularly in seasonal businesses where trading volumes mask the underlying cost. UK MCA contracts vary on whether the holdback rate can be renegotiated mid-advance — most cannot.

Holdbacks are normally collected by integrating directly with the merchant's card acquirer or platform. This split-funding setup is automatic and removes the option to delay repayment. Borrowers should confirm before signing whether the holdback is calculated on gross or net card volume, and how refunds or chargebacks are treated.