Holdback
Definition
In merchant cash advance agreements, the holdback (also called retrieval rate or withholding percentage) is the fixed percentage of daily credit card sales or bank deposits that is automatically deducted to repay the advance. Typical holdback rates range from 10% to 25% of daily receipts. A higher holdback means faster repayment but greater impact on daily cash flow. Unlike fixed loan payments, holdback amounts fluctuate with revenue — during slower periods, the daily payment is lower, and during busy periods, it's higher. This variable repayment structure is one of the key differences between MCAs and traditional loans.
Example
A retail store with $2,000 in daily credit card sales and a 20% holdback has $400 deducted daily toward their MCA repayment. On a slow Monday with only $1,200 in sales, only $240 is deducted. On a busy Saturday with $3,500 in sales, $700 is deducted.
Related Terms
Factor Rate
A factor rate is a multiplier used to determine the total cost of a merchant cash advance or short-t...
Merchant Cash Advance (MCA)
A merchant cash advance is a financing arrangement where a business receives a lump sum of capital i...
Retrieval Rate
The retrieval rate is another term for the holdback percentage in a merchant cash advance. It repres...
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