# Split funding (lockbox MCA)

> Split funding routes a percentage of every card transaction to the funder before it reaches the merchant — typically 8-18% of daily card volume — instead of fixed daily ACH withdrawals.

Split funding (sometimes called "lockbox MCA" or "split processing") is an alternative repayment structure where the funder claims a percentage of each credit card transaction at the processor level, rather than withdrawing a fixed amount via ACH each business day.

**The mechanic.** Your merchant processor (Square, Toast, Clover, Stripe, etc.) routes a percentage of every settled card transaction directly to the funder's account before depositing the remainder to you. If your customer pays $100 with a card and your split is 12%, $12 goes to the funder and $88 hits your bank account.

**Why merchants often prefer split funding.**
- Repayment scales naturally with revenue. A slow day means a smaller debit; a busy day means a larger one. No NSF risk from fixed ACH on a slow Tuesday.
- No daily bank account drain that surprises merchants who forgot the schedule.
- Often comes with slightly better factor rates (1.20-1.30 range vs 1.28-1.40 for ACH) because the funder has better collection security.

**Why merchants sometimes regret it.**
- The split is invisible at the time of sale. Merchants see their merchant statement and don't immediately reconcile against advance payback.
- If you change processors mid-term, the agreement typically requires immediate payoff — switching POS systems triggers default.
- Cash-heavy businesses can find themselves in a structural bind: the percentage stays the same but card mix can shift, leaving cash revenue uncovered.
- High-volume days can produce uncomfortably large single-day debits.

**When split funding fits.**
- High card-volume businesses (restaurants, retail, e-commerce) where 70%+ of revenue is card-based.
- Businesses already on processors that offer embedded financing (Toast Capital, Square Capital, Clover Capital all use split funding natively).
- Merchants who want to avoid the daily-ACH bank-account-surprise dynamic.

**When daily ACH fits better.**
- Cash-heavy businesses (auto shops with cash repairs, certain trades, some restaurants).
- Merchants planning to switch processors during the term.
- Businesses that prefer predictable fixed daily payments for cash-flow modeling.

**The pragmatic takeaway.** If you're processing on Toast, Square, or Clover, embedded split funding through that processor is usually the cleanest option. For generalist MCA shopping, ask both options — split funding and daily ACH — and run the cash-flow math both ways before deciding.

## 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.
- [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.
- [Merchant cash advance (MCA)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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.
- [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.

---

Source: https://fundnode.co/glossary/split-funding (HTML version)
Document: Split funding (lockbox MCA) — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.