Brookmark Financial in Sterling, Colorado passes merchant cash advance requests to providers and helps owners put the total collected next to the alternatives first.
At a glance
- Restaurants, Logan County, CO
Full-service restaurants, Logan County, CO: 15 employer establishments; limited-service restaurants: 13 (CBP 2023)
- Auto repair shops, Logan County, CO
Auto repair and maintenance shops, Logan County, CO: 19 employer establishments with 81 paid employees (CBP 2023)
- Retail payroll, Logan County, CO
Retail trade employers, Logan County, CO: $40.5 million in annual payroll (CBP 2023)
Merchant cash advance or revenue-based financing: a Logan County, CO restaurant comparison
Revenue-based financing and a merchant cash advance both take a share of sales instead of a fixed monthly payment. The difference is in what is being sold. With revenue-based financing, the business takes a loan or advance that is paid from a share of all revenue until a set total is reached; with a merchant cash advance, a provider buys a share of future card receipts.
For a restaurant, both rise and fall with sales. Compare them on the total dollars collected or paid, the share taken each day or week, what happens in a slow month, and whether either can be closed out early for less.
Logan County, CO counted 15 full-service and 13 limited-service restaurants with paid employees in 2023 (County Business Patterns).
How to calculate a factor rate before a Sterling, CO auto shop signs
The factor rate is a multiplier. Multiply the advance by it to get the total the provider collects. Illustration only, invented figures: an auto shop takes a $20,000 advance with 1.32 as the factor rate, so the provider collects $26,400 in total (our arithmetic). With a holdback of 12% of card sales and card sales of $1,500 a day, the provider collects $180 a day, and collection takes about 147 card-sales days (our arithmetic: $26,400 divided by $180, rounded up).
Do not read a factor rate as an annual rate. Because the full cost is collected over a short period, the cost per year can be far higher than the factor rate suggests. Ask the provider for the total and the expected collection period in writing.
Merchant cash advance or line of credit for a Logan County, CO auto shop?
For the same shop, a line of credit draw of $20,000 held for 147 days at an annual rate of 13% would cost about $1,047.12 in simple interest (our arithmetic, invented figures), against $6,400 for the advance above. A line of credit needs a partner to approve it first, and not every shop qualifies, but the comparison shows why the total cost belongs on the table.
A merchant cash advance is collected from sales, so in a slow week less is taken. A line of credit has fixed payment rules regardless of sales. Which one suits the shop depends on how steady its card sales are and how soon it needs the money.
How a merchant cash advance works for Sterling, CO card-heavy shops
A merchant cash advance only applies where there are steady card sales, such as a restaurant counter, a parts store or a salon. Receipts that arrive as checks or bank transfers, as they do for many contractors, are not card sales, and a card-sales advance does not touch them.
Where card sales are steady, the provider reviews several months of processing statements, agrees a holdback, and collects that share from each settlement until the purchased amount is reached.
What a factor rate in an MCA means for Sterling, CO restaurants
For a restaurant, the factor rate decides the total cost and the holdback decides how soon the total is collected. A lower holdback stretches collection over more days; it does not lower the total. A restaurant with thin weeks in the off-season should test the holdback against its slowest month of card sales.
Restaurants and other eating places in Logan County, CO reported $10.4 million in annual payroll in 2023 (County Business Patterns).
Is a merchant cash advance a loan for Logan County, CO contractors?
No. A merchant cash advance is a purchase of future receivables, not a loan, and the provider collects its share from those receivables. For a contractor, that matters in two ways: card sales may be a small part of what a contractor takes in, and the advance agreement, not lending rules, governs what happens if sales stop.
A contractor whose customers pay by check or bank transfer will find a line of credit or working capital loan closer to how the business is paid.
By Brookmark Financial ยท Updated