Revenue-Based Funding or a Merchant Cash Advance: What Differs for a Paducah, KY Business?

With revenue-based funding, the payment is a fixed percentage of the money that reaches the business bank account each month: card settlements, checks, transfers from customers, invoice payments. The amount moves with total revenue. With a merchant cash advance, the provider buys a share of card sales and collects a percentage of card batches only. A check from a catering client or a wholesale account never touches the holdback.

That difference decides which product follows the business’s real income. A sit-down restaurant that takes nearly everything by card looks about the same under either base. A shop that bills part of its work by invoice has a deposit base noticeably larger than its card base, and the two products respond differently to a month when invoices are paid but the counter is quiet.

Neither product carries an interest rate. Each sets a total payback on the first day: the amount funded times a multiple, called a factor rate on a card-sales advance and a payback cap or multiple on revenue-based funding. The percentage taken each month decides how long collection lasts, not what it costs.

Illustration only, invented figures: a Paducah, KY shop with a catering side is offered $30,000 at a 1.28 multiple, for a payback of $38,400 in this example. In this example one provider asks for 7% of monthly deposits, the other for 12% of card sales. The table on this page shows the first four months in this example.

In this example the deposit share sends $13,720 over four months and the card share sends $13,920. In this example, month 3 is the one to study: catering checks kept deposits up while card sales dipped, so the deposit share sent more that month than the card share did. In this example, the payback is identical in both cases; only the pace differs.

Two contracts with the same multiple can behave very differently. Read these terms twice, and ask the provider to point to the clause for each one:

• What counts as revenue: all deposits, or only customer receipts, and whether transfers between the owner’s own accounts are excluded
• Whether the payment is a true percentage of actual sales or a fixed debit based on an estimate
• How and how frequently a fixed debit is reconciled to actual sales, and who has to ask for it
• Any minimum monthly amount that applies even when revenue falls
• Whether settling early reduces the payback or leaves it unchanged
• What happens if the business changes bank accounts or card processors
• Any limit on taking other financing while a balance is open

If a clause is unclear, the time to ask is before signing. The funding partner that reviews a request sets the actual terms, and they can differ from one offer to the next.

A card-share advance fits a counter business whose card batches are close to its whole income: a quick-service restaurant, a clothing boutique, a nail or hair salon. Revenue-based funding fits a business with several income streams, such as a repair shop that bills a few commercial accounts, a caterer, or a cleaning company paid by check and card. A business with steady costs and steady income may find a fixed installment simpler to plan around: working capital loans and the other business loan types on this site cover those.

In McCracken County, KY, County Business Patterns lists 218 establishments in Other Services (except Public Administration) for 2023, the sector that holds repair shops, salons, laundries and similar businesses. A 56.4% share of them had fewer than five employees, small enough that one owner can be the person who reconciles every deposit.

The card-sales advance page sets out how an advance is priced in more depth. To talk through an offer, call (270) 236-8708 or open the request form; other posts for local owners are on the blog.