Merchant Cash Advances for Metairie, LA Accounting Firms: Costs, Holdbacks and Alternatives

Revenue pays back each of them, yet the two are put together in different ways. A merchant cash advance buys future card receipts and collects a fixed share of each day's card settlements. Revenue-based financing usually takes a share of total monthly revenue, from all payment types, until a set cap is reached, and some versions are written as loans.

Illustration only, invented figures: a sit-down restaurant takes $40,000 of revenue-based financing with a cap of 1.4 times the amount, so $56,000 is collected at 6% of monthly revenue. At $95,000 of monthly revenue, that is $5,700 a month, or about 10 months to reach the cap. A slower month lowers the payment; a busier one raises it.

Full-service restaurants in Jefferson Parish, LA counted 364 employer establishments in 2023 (CBP); for each one, the comparison turns on the total dollars collected and how the daily or monthly pull fits its sales.

The factor is the multiple of the advance that the provider collects. Dividing the total to be collected by the amount advanced gives it; subtracting 1 gives the cost as a share of the advance.

Illustration only, invented figures: a law office that takes card payments for retainers receives $15,000 and agrees to have $18,750 collected. The factor is 1.25, and the cost is $3,750, or 25% of the advance. That 25% is not an annual rate: if the total is collected in six months, the cost per year is far higher than 25%.

Always ask for the total collected, the holdback percentage and any fees in dollars before signing.

Accounting, tax preparation, bookkeeping and payroll offices in Jefferson Parish, LA counted 263 employer establishments in 2023 (CBP, NAICS 5412). Many firms are paid by check or bank transfer rather than card, which limits what an advance on card receipts can even be based on.

For a firm with few card sales, a line of credit is often the cheaper route when a partner offers one.

The provider pays the firm a lump sum. In return it receives a set total, collected as a holdback, a fixed percentage of each card settlement, until that total is reached. Instead, a provider may debit a set amount each day or week from the bank account, periodically reconciling that amount with sales.

Illustration only, invented figures: $30,000 at a factor of 1.32 means $39,600 collected. With a 12% holdback on $3,000 of daily card sales, about $360 is collected each sales day, so the total is reached in about 110 sales days. The cost is $9,600. For comparison, $30,000 drawn on a line of credit at an annual rate of 14% for the same 110 days would cost about $1,266 in interest, if a partner offered such a line.

For a sit-down restaurant, the factor sets the price, and the holdback sets the pace. A factor of 1.32 on $30,000 costs $9,600 whether the total is collected in four months or eight. A higher holdback collects sooner, which shortens the time but takes more of each day's card sales.

For 2023, CBP reports $177.2 million in annual payroll among full-service restaurants in Jefferson Parish, LA. A holdback that takes 12% of card sales leaves 88% for wages, food and rent, so test that split against the slowest week of the year before agreeing.

No. A merchant cash advance is a purchase of future receivables, not a loan, so there is no interest rate and no fixed term. The provider is collecting what it bought. Since an advance falls outside the loan category, rules written for loans, including their disclosure rules, may treat it differently.

Compare it with a working capital loan in dollars.