A merchant cash advance works by advancing a portion of your future daily debit and/or credit card sales in a lump sum to you. Unlike most business loans where instead of a fixed term and monthly instalment, a percentage of your card sales are released to the Financing Partner until the lump sum has been paid back.
Some “lenders” (an advancement/factoring may not be considered as a loan in some jurisdiction) may have a fix term of say 12 months and takes a range of example 5-20% of your daily/weekly/monthly card sales while ensuring you have enough to still fund day to day operation, while some lenders take example 10% of your revenue which could be any amount until the full amount has been repaid. As the “loan” may not have a fixed tenure, the interest is typically not calculated based on the period such as x% per month but by what they call a Factor Rate – a fixed percentage of the total quantum.
The mutually agreed-upon percentage is called a “holdback” or “retrieval rate” and the “lender” will prepare a letter for you to sign and inform the card processor to process it.