Glossary · Business Finance
Holdback Meaning
A holdback is the share of a business's daily card or platform sales that a merchant cash advance provider keeps until the advance and its fee are repaid. Because it is a share of sales rather than a set amount, the dollar figure collected each day moves with trading: more on a strong day, less on a quiet one. The holdback is one part of how a merchant cash advance works, and the percentage itself is set in the agreement.
That link to sales is the defining feature. The time taken to clear an advance is not fixed at the outset, because it depends on how the business trades after the funds arrive. The holdback answers one question: what share of each day's sales goes to the provider. It does not by itself show the total cost of the advance, which is set by the fee, or how long repayment will take, which depends on sales.
The word is used differently elsewhere. A holdback is not retention under a construction contract, which is money withheld from progress payments as security against defects. Nor is it the advance rate in invoice finance, which is the portion of an invoice's value paid up front. Each of those terms describes money held back, but for a different reason and under a different contract.
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If you are comparing a sales-linked advance with a term facility, we can set out how each would repay against your trading. Start with working capital loans, or call 0483 980 567.
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