# Holdback vs fixed payment (MCA repayment structures) > Holdback = funder takes a fixed % of daily card sales (varies with revenue). Fixed payment = funder debits the same dollar amount daily via ACH (doesn't flex with revenue). The two MCA repayment mechanisms — holdback (revenue-share) and fixed-dollar daily ACH — look similar on paper but produce dramatically different merchant outcomes when revenue fluctuates. Choosing the wrong structure for your revenue pattern is the most common operational mistake in MCA financing. **The mechanics — holdback (specified percentage).** The funder collects a fixed percentage of every credit/debit-card sale at the processor level. A merchant with a 12% holdback running $50,000/month in card sales pays $6,000/month to the funder; running $30,000/month pays $3,600; running $80,000/month pays $9,600. The amount auto-adjusts with revenue. This was the original MCA structure (called "specified percentage" in contracts), still used by processor-financing products: Square Capital, Toast Capital, Stripe Capital, Shopify Capital, Clover Capital. Common holdback percentages: 6-15% of gross card sales. **The mechanics — fixed daily ACH.** The funder debits the same dollar amount from the merchant's business checking account every business day, regardless of that day's revenue. A merchant with a $130K total repayment over 195 business days pays $666.67 every day — whether they did $5,000 in sales that day or $50. The fixed-ACH structure dominates the modern MCA market (roughly 85% of advances in 2026 are fixed-ACH, not holdback) because it gives funders predictable cash flow and removes the processor dependency. **The math — same advance, different stress.** A merchant takes a $100K advance, 1.30 factor, 9-month term. Revenue is seasonal: $80K/month in peak (May-Sep), $40K/month in off-season (Oct-Apr). Under 12% holdback: peak monthly payment = $9,600 (12% of $80K). Off-season payment = $4,800. Payback completes when the $130K is collected — could be 8 months in a strong year or 14 months in a weak year. Merchant cash flow stays solvent because payment scales with revenue. Under fixed daily ACH: $130K ÷ 195 business days = $667/day = $14,000/month, every month. Peak months: 17.5% of revenue going to the funder (sustainable). Off-season months: 35% of revenue going to the funder (often unsustainable, triggers NSFs, triggers default). **The strategic insight.** Holdback aligns funder and merchant incentives — when the merchant's revenue drops, the funder's collection drops too, giving both parties skin in the game during downturns. Fixed-ACH transfers all revenue risk to the merchant. This is why processor-funded MCAs (holdback structure) have default rates 3-5x lower than independent MCAs (fixed-ACH structure) at similar paper grades. **Why fixed-ACH won the market.** Three reasons: (1) funders can fund non-card-heavy businesses (trucking, B2B services) that don't process enough cards to support holdback; (2) fixed-ACH is easier to securitize and sell into asset-backed credit facilities, which lowered funders' cost of capital and made the product scalable; (3) processor relationships are hard to negotiate — only the processor's own captive lending arm gets clean holdback access. **The reconciliation safety valve.** Most fixed-ACH contracts include reconciliation language — if the merchant's monthly revenue drops below a threshold (typically the level at signing), the merchant can request a temporary reduction in the daily debit, with the funder extending the term to recoup. In practice, funders honor this only for documented revenue declines (provide bank statements showing the drop) and only after multiple requests. The reconciliation right is real but operationally friction-heavy — merchants who don't proactively invoke it within 30 days of a revenue drop are often denied retroactive relief. **The decision rule.** If the merchant is card-heavy (restaurant, retail, e-commerce) and has access to processor financing, holdback structure is almost always the right pick — slightly higher headline factor (1.20-1.30 typical) but vastly safer cash flow. If the merchant must use independent fixed-ACH MCA, factor the off-season payment burden into the decision: a deal that's 20% of peak revenue is 40% of trough revenue, and the trough is what kills businesses. ## Related terms - [Holdback percentage](https://fundnode.co/llms/glossary/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. - [Specified percentage](https://fundnode.co/llms/glossary/specified-percentage) — The fraction of future receivables the funder is purchasing in an MCA. Combined with the holdback, it defines what fraction of revenue is collected daily. - [Reconciliation (MCA)](https://fundnode.co/llms/glossary/reconciliation) — 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. - [Daily ACH debit (MCA)](https://fundnode.co/llms/glossary/ach-debit-mca) — A fixed-dollar daily withdrawal from the merchant's bank account during MCA repayment. The most common MCA repayment structure in 2026, distinct from card-sale split (holdback) structures. - [Daily debit MCA](https://fundnode.co/llms/glossary/daily-debit-mca) — Daily debit MCA repayment pulls a fixed dollar amount from the merchant's business bank account every business day via ACH until the total factor amount is collected. Most common repayment structure in 2026, replacing card-split funding. --- Source: https://fundnode.co/glossary/holdback-vs-fixed-payment (HTML version) Document: Holdback vs fixed payment (MCA repayment structures) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.