Merchant cash advance collect payments mainly by three withholding methods:
· The credit card processing company splits the credit card sales between the business and the finance company. This splitting is done on the basis of the proportion that was fixed earlier. It varies between 10% to 22%. This process is known as split withholding process.
· Business's credit card sales that are deposited to a bank account are controlled by the finance company. After this the pre-decided percentage is forwarded onto the business. This is done via ACH, EFT or wire. This process is known as lock box or trust bank account withholding.
· When it is considered as a sale, the finance company gets the information of credit card processing. This is followed by deduction of a percentage directly from the business's checking account via ACH.
But when it is considered as a loan, the finance company starts debiting a fixed amount on a daily basis, whether there is business sale or not.
This process is known as ACH withholding.