What Is a Holdback Percentage in an MCA? | Business Lending Glossary

Understand the MCA holdback percentage — how it works, how it affects daily cash flow, and what to consider before accepting a retrieval rate.

Definition

The fixed percentage of a business's daily or weekly revenue that an MCA funder automatically collects toward repayment.

Explanation

In a merchant cash advance, the holdback (also called the retrieval rate) is the mechanism by which the funder recovers the advance. Rather than a fixed monthly payment, a set percentage of every day's card or ACH receipts is remitted to the funder. Because collections scale with revenue, repayment slows when business is slow and accelerates when business is strong.

Example

A restaurant receives a $50,000 MCA with a 15% holdback; on a day with $4,000 in card sales, $600 is automatically remitted to the funder, leaving $3,400 for the business.

Why It Matters

The holdback percentage directly determines day-to-day cash availability, so businesses should model their minimum acceptable daily cash position before agreeing to any holdback rate.

Frequently asked questions

Can the holdback percentage be negotiated?

Yes, holdback rates are negotiable and experienced brokers often secure lower rates for well-qualified merchants, especially those with high and consistent revenue.