What Percentage of My Daily Sales Actually Goes to Repaying an MCA?

I just got off the phone with a pizzeria owner in Chicago about twenty minutes ago. Nice guy, been in business for ten years. He was stressing out because another funding company offered him a big chunk of cash, but when he looked at the repayment terms, he realized they wanted to take a third of his daily revenue. A third.

He asked me, "Is that normal? Because if I lose 33 cents of every dollar I bring in, I can't buy cheese for next week."

The short answer? No, that's not normal. Or at least, it shouldn't be.

I hear this question constantly. When you're looking at a Merchant Cash Advance (MCA) or revenue-based funding, everyone focuses on the total payback amount. But honestly, the most important number isn't the total—it's the holdback percentage. That’s the slice of the pie the funder takes everyday. If that slice is too big, the rest of the pie isn't enough to feed your business.

So, let's break down what percentage actually goes to repayment, what we usually see here at LoanQuail, and when you should tell a funder to take a hike.

The "Holdback" Explained (Without the Jargon)

In the industry, we call the daily repayment percentage the "holdback" or the "retrieval rate."

Basically, instead of a monthly payment like a bank loan where you write a check on the 1st, an MCA is designed to flow with your sales. We buy a portion of your future receivables at a discount. Then, as you make money, we get paid back.

The percentage is calculated based on how fast you want to pay the funds back and how strong your daily revenue is.

Typically, across the industry, acceptable holdback rates range anywhere from 8% to 25%.

That's a big range, I know. But here's how it shakes out usually:

• 8% - 12%: This is conservative. It's great for your cash flow because you barely feel it leaving your account, but it means the term (the time it takes to pay back) will be longer.
• 13% - 18%: This is the sweet spot. Most deals I write at LoanQuail land somewhere in here. It gets the balance paid off in a reasonable time—usually 6 to 9 months—without choking your operating account.
• 20% - 25%: This is getting aggressive. We usually only structure deals this high if the merchant specifically asks for a very short term (like 3 or 4 months) because they want to be done with it quickly. Or maybe they have huge profit margins and can afford it.

If someone is asking for more than 25% of your daily sales? Look, I'm gonna be real with you. Unless you have insane margins, that is going to hurt. You still have rent, payroll, and inventory to pay for.

Wait, is it a Percentage or a Fixed Number?

This is where people get confused. And rightfully so, because the industry has shifted a lot over the last five or six years.

Originally, MCAs were strictly "split processing." You'd swipe a customer's credit card for $100. The processor would automatically send $90 to you and $10 to the funder. If you sold $0 that day, the funder got $0. It was a true percentage.

We still do those deals sometimes. But most of the time now, funders use what's called a hybrid or ACH model.

Here's the thing. Changing credit card processors is a pain in the neck. Nobody wants to do it just to get funding. So instead, we look at your average monthly revenue, calculate what 10% or 15% of that would be, and turn it into a daily ACH debit from your business checking account.

For example:

Say you make $40,000 a month on average. There are roughly 20 to 21 banking days in a month.

If we agree on a 10% holdback, that means roughly $4,000 a month goes to repayment. Divide that by 21 days, and your daily payment is about $190.

So, while it looks like a fixed daily payment, it's actually based on a percentage of your historic sales.

What happens if my sales drop?

I had a client last year, runs a landscaping business in Ohio. Winter came early, ground froze solid, and his revenue dropped by half in November.

He was on a set daily payment. He called me in a panic because that daily payment was suddenly representing 30% of his daily income instead of the 12% we planned on.

This is where the "reconciliation" clause comes in.

If you have a legitimate MCA, you have the right to reconcile. That means if your sales drop significantly, you can call the funding company and say, "Hey, my revenue is down, you need to adjust my payment to match the agreed-upon percentage."

At LoanQuail, we handle this stuff. We're not robots. If you're slow, tell us. We can adjust the daily pull to reflect your actual revenue so the percentage stays where it's supposed to be. Some funders make you jump through flaming hoops to do this, asking for daily logs and bank statements every 24 hours. We try not to be those guys. But you have to communicate with us.

How we decide your percentage at LoanQuail

When I'm looking at a file, I'm not just looking at your gross deposits. I'm looking at your average daily balance.

If you deposit $100,000 a month, but your bank balance hits $0 every Friday before payroll... I can't responsibly give you a deal with a 20% holdback. You'll bounce payments. It’s bad for you, bad for us.

I check for:

• Seasonality: Are you busy in summer and dead in winter? We might structure a flexible payment plan.
• Margins: A restaurant runs on thin margins (usually 5-10%). A consulting firm might have 50% margins. The consulting firm can handle a higher daily percentage than the restaurant.
• Other Debt: Do you already have another position? If you're already paying 10% to another lender, and I add another 10%, now you're losing 20%. That's risky.

Can you negotiate the percentage?

Sometimes. Yeah, absolutely.

Most business owners just look at the "Factor Rate" (the cost of the money). They say, "Can you lower the rate from 1.25 to 1.20?"

But you should also be asking, "Can we lower the daily payment and extend the term?"

If a funder offers you a 6-month term with a $300 daily payment, ask what it looks like at 9 months. The daily payment might drop to $200. That lowers the percentage of daily sales you're losing, keeping more cash in your pocket for operations.

Just keep in mind—the longer we hold the money out, the risk goes up slightly, so sometimes the rate ticks up a tiny bit. But for many businesses, cash flow is king. Paying a little more in the long run is worth it to keep your daily bank balance healthy.

Red Flags to Watch For

I see contracts from competitors all the time. Clients send them to me and ask for a second opinion. Here are two things regarding repayment percentages that make me cringe:

1. The "Specified Percentage" is Missing
The contract should explicitly state the percentage of receivables being purchased. If it just says "Daily Payment: $499" and doesn't mention what percentage that represents, be careful. That looks a lot like a loan disguised as an MCA, and it might lack the reconciliation protections I mentioned earlier.

2. Stacking positions too deep
If a broker is trying to get you a "3rd position" or "4th position" MCA, stop. Seriously. I've seen merchants with four different daily payments totaling 60% of their revenue. That is a death spiral. At LoanQuail, we offer consolidation or buyout options to fix messes like that, but we try really hard not to help you create them.

The Bottom Line

So, what percentage goes to repayment? It should be whatever your business can comfortably afford without stressful Fridays.

Usually, that's around 10% to 15%.

If you're looking at a quote and the math says it's going to take 30% of your daily sales, you need to have a serious talk with that broker—or better yet, give us a call. We look at the whole picture. We offer revenue-based funding, sure, but we also have business lines of credit and real estate-backed term loans that might be a better fit if your daily cash flow is tight.

Don't just sign the first DocuSign that hits your inbox. Check the math. And if you want a second pair of eyes on it, reach out to us at LoanQuail. Reading the fine print is literally what I do all day.