Rushcrest Commercial Capital in Kankakee, Illinois explains merchant cash advances for businesses with steady card sales: the purchase of future receivables, factor rates, holdbacks, a worked example, and how an advance compares with revenue-based financing and working capital.
At a glance
- Gasoline stations, Kankakee County, IL
Gasoline stations, Kankakee County, IL: 48 employer establishments taking card sales at the pump and counter (CBP 2023)
- Restaurants and other eating places, Kankakee County, IL
Restaurants and other eating places, Kankakee County, IL: 176 employer establishments (CBP 2023)
- Accommodation and food services, Kankakee County, IL
Accommodation and food services, Kankakee County, IL: 252 employer establishments, 4,002 paid employees (CBP 2023)
Factor, holdback and total: an advance for Kankakee, IL card-sales businesses
The provider pays a lump sum now in exchange for a larger amount of the business's future card receivables. The larger amount is set by a factor rate: an advance of a given size times the factor equals the total to be remitted. Each day, a set percentage of card settlements, the holdback, goes to the provider until the total is reached. A slow week remits less; a busy week remits more. There is no interest rate and no fixed end date, which is why the cost is easy to underestimate.
Illustration only, invented figures: on a $30,000 advance priced at a 1.32 factor, $39,600 goes back to the provider, which is $9,600 above the advance. With a 12% holdback on $1,500 of daily card sales, about $180 goes to the provider each day, so the total takes about 220 selling days to remit.
Revenue-Based Financing vs. a Merchant Cash Advance for Kankakee, IL Station and C-Store Owners
Revenue-based financing and a merchant cash advance both take a share of sales, but they are different contracts. The advance is a purchase of card receivables yet to be earned, which is why it is not a loan. Revenue-based financing is usually structured as financing, with payments set as a share of total revenue and a cap on the total. For a station or c-store owner, the practical questions are which sales the share applies to, whether fuel sales count, and what the total cost is in dollars.
Kankakee County, IL had 48 gasoline stations with paid staff in 2023, 44 of them with convenience stores (County Business Patterns, 2023).
Is Revenue Based Financing a Good Idea? An Example With Fuel Dispensers
It can be, for a business whose sales are seasonal or uneven, since the payment falls when sales fall. It is a poor fit when the money buys something with a long life, such as new fuel dispensers, because the full cost arrives within months while the dispensers earn for years. Equipment financing spreads that cost over the equipment's working life.
Compare it with equipment financing for dispenser work.
Is Revenue Based Financing the Same as MCA? An Example With Walk-In Coolers
Not quite. Both take a percentage of sales, but an advance is a purchase of receivables while revenue-based financing is set up as a financing agreement with its own cap and terms. A restaurant replacing a walk-in cooler should compare an offer of either kind with an equipment quote on the cooler: the cooler will run for years, and spreading its cost over that time keeps more of each day's sales in the business.
Revenue Based Financing for Small Business: Car-Wash Equipment and Canopy Repairs
A car wash bay or a canopy repair at a station is a large, one-time cost. Revenue-based offers can cover it, but the share of revenue taken each day adds up. Ask each provider for the total amount, the share, which revenue it applies to, and whether early completion reduces the total.
The gas station loans page covers car-wash equipment and remodels.
Choosing Between Merchant Cash Advance and Revenue Based Financing at a Kankakee, IL Restaurant
A Kankakee, IL restaurant comparing the two should line up the same figures for each offer: the advance, the total to be remitted or paid, the daily or weekly share, which sales it applies to, and the fees. Then set both against a working capital loan quote. A merchant cash advance is not a loan, so the comparison has to be made in dollars rather than rates. Ask, too, whether the provider files a UCC lien on business assets, since a lien can complicate a later loan request.
Kankakee County, IL had 75 full-service and 81 limited-service restaurants in 2023 (County Business Patterns, 2023). See working capital loans and restaurant loans.
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