ACH (Automated Clearing House): An electronic way of moving money from one bank account to another. It’s how the MCA lenders pull repayment directly from a merchant’s business bank account.
Average daily balance (ADB): This is the average cash balance your business bank account holds on a typical day. Every funder computes it, and they use it to judge your ability to repay whatever you’re borrowing. It’s a very key number.
Account executive (AE): Their job is to connect you, the owner, with the funder that has an offer for you. The AE explains the offer to you, and guides your business through the funding process.
Buyer: This is the funding company that purchases your business’ future receivables. You, the merchant, are the seller.
Buy rate: The starting point for any funder. It’s the lowest rate the funder can offer.
Clawback: When the funder takes back the commission it paid a broker or sales rep for bringing them the deal. It usually happens when the merchant defaults within 30 days of funding.
Origination fee: This is a charge the funder makes. The funder subtracts it from the amount they’re going to deposit into your business account.
Confession of judgment (COJ): A document, signed by you as the owner, which gives the funder an automatic judgment if you default. This gets done by notarization.
CC split: You repay a fixed percentage of your gross daily credit card sales. It works for businesses with a lot of credit or debit card sales. Even so, MCA lenders never say they’re lending. They talk of “purchasing future receivables,” a technical way of saying it’s not a loan.
Balance: After an MCA lender advances your business money, this is how much you still owe.
Default: When you break the terms of the Merchant Funding Agreement you signed with the funder.
Double-funding: This is when you secretly get money from a second funder on the same day as getting the first one.
Early payoff discount: It means if your business pays back the advance before the MCA term is up, the funder will let you pay less back.
Factor rate (discount rate): This is the amount over the funded amount, which your business will have to pay back to the MCA lender. Your merchant agreement sets it.
Funder: A company that provides business owners with Merchant Cash Advances.
Funding call: This is the name for a phone call you’ll get from the MCA lender’s underwriter. It’s when they go over the merchant agreement terms and make sure you’re clear on them.
Holdback: The percentage of every daily credit card sale that goes to repaying your MCA advance. It’s spelled out in your Split Agreement.
ISO: They help sell MCA products to merchants. They can send your merchant application to a whole bunch of funders.
ISO agreement: This is the contract that sets up the relationship between the funder and their ISO. It details how much commission the broker gets, and what their duties are to the funder.
Lockbox account: An account held by a third party. It’s there to hold your credit card payments before they’re split between you and the lien holder.
Merchant Cash Advance (MCA): The sale of a business’s future receivables at a discount. The advance is paid back by a fixed daily or weekly ACH, or a fixed percentage of credit or debit card sales.
Merchant interview: Before funding a business, the underwriter does a short interview with the business owner. It helps decide if the business is a good risk.
Payoff letter: A letter on funder letterhead. It shows the merchant’s current payoff balance, and gives their wiring instructions.
Bank statements: These are the documents that show a merchant’s bank deposits over a certain time. The lender reviews them to figure out how much revenue the business owner can expect.
Specified percentage: A percentage of your business’s gross sales that the lender figures into their payment demands.
Points: The commission rate paid to a broker or sales rep for bringing a deal to a lender.
Positions: How many separate advance contracts a business holds at the same time.
Pre-underwriter: This is the analyst who checks out your bank statements and application first. They look for any business bank account issues and risk factors. They also gather information to send to the underwriter.
PSF (Professional Service Fee): This is a fee brokers may charge merchants for bringing their deal to a successful close.
Purchase price: This is the amount the funder advances to your business.
Purchased amount: The total sum of all the money you need to pay back.
Remittance percentage: This is the percentage of gross sales funders withdraw every day or week from your business bank account.
Renewal: It’s an advance from the same funder. It can take place after you’ve paid off the first advance. Or else, the remaining balance can be folded into the new one.
Seller: This is the business owner who’s selling future receivables to the funder, who’s the buyer.
The total cost of the advance: This is how much a merchant will need to pay back, minus the funding amount. It’s spelled out in your merchant agreement.
Stacking: This is putting a second advance on top of an earlier one you still owe.
Stips (Stipulations): The information or documents needed to complete and close a Merchant Cash Advance. They can include documents or information that clears up a question about a transaction on your bank statements, or a landlord contact.
Syndication: When outside investors put money into a specific deal. The syndicators share the risk with the funder.
Term: How long the funder figures it’ll take a merchant to pay back an advance.
Reconciliation: This is when the funder adjusts the repayment amount. The funding company changes it to match the merchant’s actual sales and ability to repay.
UCC (Uniform Commercial Code): A broad set of laws that work across the United States. They cover commercial transactions. There’s a UCC filing, which secures a creditor’s place in line to collect from a debtor.
Underwriter: This is the person who assesses how much risk each merchant has of defaulting on their advance. The underwriter also figures out whether the business can repay an advance.
Underwriting: The process lenders use to assess a merchant’s risk of default. It happens before funding.
Mark up range and up-sell: The markup range is the band of rates above the buy rate, which the lender will let brokers or reps add to it. The up-sell is the contract rate, minus the buy rate.
Usury laws: Laws that cap the interest rate lenders may charge borrowers. These laws are different in different states.
Zero balance letter: It’s a document on funder letterhead, which shows that your business has paid back its advance. The letter says you’ve met the Merchant Agreement’s terms and conditions.
About Delancey Street
Delancey Street is a premier, and award winning, business debt settlement company that helps business owners nationwide. Our goal is simple: help you escape debt in a safe and legal manner. Based out of New York, we can help in 49 of 50 states. We tell you how it is; because your business and future is on the line.
