How It Works

Let's say your business needs $50,000. With split funding, you might:

• Get $30,000 from Lender A
• Get $20,000 from Lender B

Each lender takes their share of your daily credit card sales to get paid back. So if Lender A funded 60% of your total, they get 60% of the repayments.

Why Businesses Use Split Funding

Get More Money: One lender might only approve you for $25,000, but you need $50,000. You can combine offers to accomplish your goal using split funding.

Spread the Risk: If one lender has strict terms, you can balance it with another that offers better conditions.

Faster Approval: Multiple smaller amounts often get approved faster than one large loan.

Simple Example

Mike's auto shop needs $40,000 for new equipment:

• Bank says no (too risky)
• Lender 1 approves $25,000
• Lender 2 approves $15,000
• Total: $40,000 (exactly what he needs)

Each day, Lender 1 takes 62.5% of repayments ($25,000 ÷ $40,000), and Lender 2 takes 37.5% ($15,000 ÷ $40,000).

Things to Watch

Multiple Payments: You'll have payments going to different lenders. Keep track of who gets what.

Different Terms: Each lender might have different rates and payment schedules.

Total Cost: Make sure the combined cost makes sense for your business.

Is It Right for You?

Split funding works well if:

• You need more money than one lender will give you
• You want to diversify your funding sources
• You're comfortable managing multiple payments

It's like having multiple credit cards instead of one big one. More complex to manage, but can give you the total funding you need when a single lender won't cover everything.

How Repayment from Card Processors Works

You repay a merchant cash advance with the proceeds from your credit card transactions. But how does that actually work? Let's break it down step by step.

The Basic Setup

When you sign up for a merchant cash advance:

• You give the lender access to your card processor (like Square, Stripe, or your bank's system)
• They set up automatic withdrawals
• Every day (or week), they take a percentage of your card sales

Daily Collection Example

Let's say you got a $20,000 advance and agreed to pay back $24,000 with daily collections of 10%.

Monday: 

• You process $800 in card sales
• Lender takes: $80 (10% of $800)
• You keep: $720

Tuesday: 

• You process $1,200 in card sales
• Lender takes: $120 (10% of $1,200)
•  You keep: $1,080

Wednesday: 

• Slow day, only $300 in card sales
• Lender takes: $30 (10% of $300)
• You keep: $270

How the Money Moves

Step 1: Customer pays with card

Step 2: Card processor (like Square) gets the money

 Step 3: Processor automatically sends the lender's percentage

Step 4: Remaining money goes to your business account

This happens automatically every business day.

What About Cash Sales?

The lender only takes money from card transactions. Cash sales, checks, and bank transfers aren't touched. That's why it's called a "merchant cash advance" - it's tied to your merchant account (card processing).

Slow Days vs. Busy Days

Busy Day: $2,000 in card sales = $200 payment (10%) 

Slow Day: $200 in card sales = $20 payment (10%)

Your payments automatically adjust to your sales. No fixed monthly payment to worry about.

When You're Paid Back

The lender keeps taking their percentage until you've paid the full amount. In our example:

• You owe $24,000 total
• At 10% per day, you need $240,000 in card sales to pay it off
• This usually takes 6-18 months depending on your sales volume

Weekend and Holiday Rules

Most lenders only collect on business days. If you don't process cards on Sunday, they don't take anything. Some agreements include weekends if you regularly process weekend sales.

What Happens with Chargebacks?

If a customer disputes a charge and you get a chargeback, it doesn't affect the repayment calculation. The lender takes their percentage based on gross sales, not net sales.

Multiple Lenders

If you have split funding (multiple lenders), each one takes their agreed percentage:

• Lender A: 6% of daily card sales
• Lender B: 4% of daily card sales
• Total: 10% goes to repayments

How Does Repayment from Card Processors Work?

If you've ever used a credit or debit card to make a purchase, you've interacted with a complex system behind the scenes. One key part of this system is how money moves from the customer to the merchant, and then how the card processor gets paid back. Let’s break down how repayment from card processors works in simple terms.

Making a Purchase

When you buy something using your card, the transaction goes through a series of steps:

Authorization: Your bank approves the purchase.

Settlement: The merchant's bank receives the money from your bank.

Funding: The merchant receives funds from the bank with assistance from the card processor.

The Role of Card Processors

 Card processors are companies that handle the technical and financial details of credit card transactions. They facilitate communication between the merchant’s bank (acquirer) and your bank (issuer). They also handle the transfer of funds.

How Does the Processor Get Paid?

After the transaction, the merchant is owed money. This sum is obtained from the merchant's bank by the card processor. But the processor doesn’t keep all the money:

• They deduct their fees (called interchange fees, processing fees, etc.).
• The remaining amount is transferred to the merchant. 

Repayment to Card Issuers

Your bank (the issuer) is responsible for paying the card network (like Visa or Mastercard).The money is subsequently moved from your bank to the merchant's bank thanks to the card network. 

How Do Payments Get Repaid?

Merchant's Bank: Sends the payment (minus fees) to the card processor.

Card Processor: Takes its fees and forwards the remaining funds to the merchant.

Card Network & Issuer: Reconcile the transaction and ensure the issuer is reimbursed for the purchase made by the customer.

Final Step – Merchant Repayment

The merchant eventually receives the full sale amount minus processing fees. The processor is repaid by the merchant, often through a regular billing cycle.

The Bottom Line

Repayment to the card processor is automatic and based on your real sales. Busy days mean bigger payments, slow days mean smaller payments. It's designed to match your cash flow, which is why many businesses prefer it over fixed monthly loan payments.

The key is understanding that every card transaction helps pay down your advance - no sales means no payments, but also no progress toward paying it off.