Holdback Rate

The holdback rate (also called the retrieval rate) is the percentage of a business's daily card takings that a merchant cash advance provider automatically collects as repayment. A typical holdback rate is 10-20% of daily card sales.

Because repayment is tied to a percentage of card sales rather than a fixed amount, the speed of repayment varies with business performance. A business taking £10,000 per day in card sales at a 15% holdback rate repays £1,500 per day. In a quiet month where daily sales are £5,000, repayment drops to £750 per day.

The holdback rate directly affects a business's cash flow during the repayment period. A high holdback rate (25%+) can put significant pressure on day-to-day cash flow, even if it means the advance is repaid faster. Negotiate the holdback rate carefully - a lower rate gives more cash flow flexibility even if it extends the repayment period.

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