The specified percentage (sometimes called the "specified percentage of receivables") is the contractual figure that defines what fraction of the merchant's future receivables the funder is purchasing in an MCA.
Why it exists. Legally, an MCA is a purchase of receivables, not a loan. The contract has to state a specific percentage of receivables being purchased. If the contract were silent on this, courts would likely re-characterize the MCA as a loan (subject to usury caps).
How it works mechanically. - The funder calculates the total receivables they are buying: e.g. $65,000 on a $50,000 advance × 1.30 factor. - The funder specifies what fraction of daily receivables they will collect to recover that $65,000 — e.g. 15% of every dollar deposited. - The contract states something like: "Funder is purchasing 15% of Merchant's future receivables up to a total of $65,000."
Why this matters beyond legalese. - A higher specified percentage = faster repayment but tighter daily cash flow. - A lower specified percentage = longer repayment but more breathing room. - For card-sale-split MCAs (Toast, Square), the specified percentage IS the daily debit fraction. - For fixed-daily-ACH MCAs, the specified percentage is a contractual fiction; the actual collection is the fixed dollar amount. This is why fixed-daily-ACH MCAs are sometimes legally challenged as "really loans."
What to look for in your contract. - A specified percentage of 15% or lower is conservative. - 20%+ is aggressive and stresses cash flow on slow days. - A contract with no specified percentage at all is a red flag for legal vulnerability — both sides can re-characterize the deal.
Related terms
- Holdback percentage — The fraction of daily card-sale revenue a funder takes during MCA repayment, typically 8–20%. Lower is safer for the merchant's cash flow.
- Reconciliation (MCA) — A contract provision allowing merchants to request a reduced daily debit when revenue drops. Required for MCAs to remain legally a 'sale,' not a 'loan' in most states.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
AI agents: this term is available as raw markdown at /llms/glossary/specified-percentage.