Funding glossary

Plain-English definitions for the terms that come up most in business-funding conversations — no rates quoted, just what the words mean.

Factor rate

A decimal multiplier — commonly around 1.1 to 1.5 — applied to the advance amount to calculate total repayment on a merchant cash advance. Unlike an interest rate, it doesn't accrue over time: the total repayment amount is generally fixed at signing regardless of how quickly you repay, unless your agreement specifically includes an early-payoff discount.

Holdback (card-split)

The percentage of each day's card settlements collected toward repaying an advance. A 10% holdback on an $8,000 card-sales day means $800 goes to repayment that day; a $2,000 day produces a $200 holdback. The percentage is fixed in the agreement, but the dollar amount it produces moves with your actual daily card volume.

Remittance

The dollar amount actually collected from your card settlements or bank account on a given day (or week) toward repaying an advance. Remittance is the result of applying the holdback percentage to that period's revenue — it's the line item you'll typically see on a funder's statement.

ACH vs. card-split

The two common repayment channels. A card-split routes the holdback directly through your card processor before the remaining balance settles to your account. An ACH withdrawal instead debits your bank account on a schedule — daily or weekly — either as a fixed amount or a percentage estimated from recent deposits. Some states and some funders require an ACH or lockbox structure instead of a direct card-split.

Renewal

Additional funding offered against a business's card volume once a meaningful share of an existing advance — often around 50–75% — has been repaid. A renewal is underwritten similarly to a new advance and is a separate concept from stacking, which means taking on a second advance while the first is still largely outstanding.

Stacking

Holding more than one active advance at the same time, each with its own holdback percentage collecting against the same card volume. Combined holdbacks from stacked advances can significantly reduce the cash available to run day-to-day operations, which is why funders and advisors generally caution against it.

Buy rate

The baseline factor rate or cost a funder offers before any markup a broker might add. It's an industry term you may hear referenced in underwriting conversations. As a finder, we do not set or mark up buy rates — funding partners determine final pricing directly with you.

NSF (non-sufficient funds)

A bounced transaction — a check, ACH debit, or withdrawal attempt that a bank rejects because the account lacks the funds to cover it. Funders review recent NSF activity on bank statements as one signal of cash-flow stability. Occasional NSFs don't automatically disqualify an application, but a high or rising count can affect terms.

Negative days

Days on a bank statement where the account balance drops below zero — distinct from NSFs, which are specific rejected transactions. Funders often look at negative-day counts over the most recent three months as part of assessing how much cash cushion a business typically carries.

Time in business (TIB)

How long a business has been operating, usually measured from formation or first revenue and expressed in months. TIB is one of the core underwriting factors alongside card volume and deposit history; most funders set a minimum, commonly around six months, though it varies and can sometimes be offset by strong, consistent revenue.

UCC filing

A UCC-1 (Uniform Commercial Code) filing is the public record a funder files to claim a security interest in specified business assets or future receivables tied to an advance. It's a standard, routine part of most commercial financing agreements — not a lawsuit or a sign of default — and is typically released once the obligation is satisfied.

Confession of judgment

A clause, once common in some commercial financing agreements, in which a business owner agrees in advance to waive certain legal defenses if the advance goes into default — allowing a judgment to be entered quickly without a full court process. A number of states have restricted or banned confession-of-judgment clauses in commercial financing in recent years; ask any funder directly whether their agreement includes one and how it would work in your state.