Daily Remittance Explained: How MCA Repayment Works

Q: What Is Daily Remittance?

**Daily remittance** is the process by which a business automatically sends a portion of its revenue to a funder every business day as repayment for a merchant cash advance or revenue-based financing agreement. Unlike a traditional business loan — where you make a fixed monthly payment regardless of what your business earns — daily remittance ties your repayment directly to your sales activity. Here's how it typically works: - You receive a lump sum of capital upfront (for example, **$50,000**)

Q: A Simple Daily Remittance Example

Let's say your business receives a **$50,000 merchant cash advance** with a factor rate of **1.30** and a holdback rate of **12%**. - **Total repayment amount:** $50,000 × 1.30 = **$65,000** - **Daily revenue (average):** $5,000 - **Daily remittance:** $5,000 × 12% = **$600 per day** - **Estimated repayment timeline:** $65,000 ÷ $600 = approximately **108 business days (roughly 5 months)** On a slower day where your revenue drops to $2,000, your remittance drops to $240. On a strong day with $8,

Daily Remittance Explained: How MCA Repayment Works

If you've ever explored fast funding for your business, you've probably stumbled across the term daily remittance. It sounds technical, but the concept is straightforward — and understanding it could save you thousands of dollars and a lot of financial stress.

This guide breaks down exactly how daily remittance works, what it means for your cash flow, and how it compares to traditional loan repayment structures. Whether you're considering a merchant cash advance (MCA) or simply want to understand your options, keep reading.

What Is Daily Remittance?

Daily remittance is the process by which a business automatically sends a portion of its revenue to a funder every business day as repayment for a merchant cash advance or revenue-based financing agreement.

Unlike a traditional business loan — where you make a fixed monthly payment regardless of what your business earns — daily remittance ties your repayment directly to your sales activity.

Here's how it typically works:

You receive a lump sum of capital upfront (for example, $50,000)
The funder applies a factor rate (commonly between 1.15 and 1.49) to determine your total repayment amount
A fixed percentage of your daily credit card or bank deposits — called the holdback rate or retrieval rate — is automatically remitted to the funder each business day
Remittance continues until the full balance is repaid

A Simple Daily Remittance Example

Let's say your business receives a $50,000 merchant cash advance with a factor rate of 1.30 and a holdback rate of 12%.

Total repayment amount: $50,000 × 1.30 = $65,000
Daily revenue (average): $5,000
Daily remittance: $5,000 × 12% = $600 per day
Estimated repayment timeline: $65,000 ÷ $600 = approximately 108 business days (roughly 5 months)

On a slower day where your revenue drops to $2,000, your remittance drops to $240. On a strong day with $8,000 in revenue, you'd remit $960. The payment flexes with your business — that's the core appeal.

How Daily Remittance Is Collected

Funders use two primary methods to collect daily remittances:

1. Credit Card Split Processing

If your business processes a high volume of credit and debit card transactions, the funder works directly with your payment processor. Each time a transaction is settled, the agreed-upon percentage is automatically split and sent to the funder before the remainder hits your bank account. You never have to manually initiate a payment.

2. ACH Withdrawals

For businesses with mixed revenue streams — not solely card-based — funders often use ACH (Automated Clearing House) debits. Each business day, a fixed or percentage-based dollar amount is withdrawn directly from your business checking account.

Some agreements use a fixed daily ACH amount rather than a true percentage. This is important to understand: a fixed daily ACH is less flexible than a true percentage-based holdback, because the amount doesn't adjust when revenue is low.

Pro tip: Always confirm with your funder whether your daily remittance is a true percentage of daily revenue or a fixed dollar amount. The distinction significantly affects your cash flow on slow days.

Daily Remittance vs. Monthly Loan Payments

Understanding how daily remittance compares to traditional loan structures helps you make a smarter financing decision. For a deeper look at how these options stack up, see our guide on MCA vs. business loan: which financing is right for you?

Feature	Daily Remittance (MCA)	Monthly Loan Payment
Payment frequency	Every business day	Once per month
Amount flexibility	Varies with revenue	Fixed amount
Credit score required	Usually low or none	Moderate to strong
Collateral required	Typically none	Often required
Cost structure	Factor rate	Interest rate (APR)
Speed of funding	24–72 hours	Days to weeks

The biggest tradeoff is cost. MCAs with daily remittance are significantly more expensive than traditional financing when expressed as an annualized rate. A factor rate of 1.30 on a 5-month advance can translate to an effective APR exceeding 60% in some cases — far above what you'd pay on an SBA 7(a) loan, which currently carries rates in the range of 9.0%–9.5% APR for loans over $350,000.

That said, MCAs serve a different purpose. They're designed for businesses that need fast capital, have variable revenue, or don't yet qualify for traditional financing.

The Real Cost of Daily Remittance: Factor Rates Explained

One of the most common points of confusion for business owners is that merchant cash advances don't use traditional interest rates — they use factor rates. Understanding the difference between factor rates and APR is essential before signing any MCA agreement.

A factor rate is a simple multiplier applied to your advance amount to determine total repayment. Here's what different factor rates actually cost:

Factor rate 1.15 on $30,000 → Total repayment: $34,500 (cost of capital: $4,500)
Factor rate 1.25 on $30,000 → Total repayment: $37,500 (cost of capital: $7,500)
Factor rate 1.40 on $30,000 → Total repayment: $42,000 (cost of capital: $12,000)

Because daily remittance reduces your balance faster on high-revenue days, the effective cost can actually be higher than it appears when you translate it to an APR. The Federal Reserve's research on small business credit consistently shows that business owners often underestimate the true cost of alternative financing — making transparency and comparison-shopping essential.

When Daily Remittance Makes Sense

Despite higher costs, daily remittance financing can be the right tool when:

Your business has seasonal or unpredictable revenue and a fixed monthly payment feels risky
You need funding in 72 hours or less to cover payroll, inventory, or an emergency
You've been in business less than two years and don't yet qualify for bank financing
You have strong daily card volume but limited hard assets for collateral
You plan to repay early and your agreement doesn't carry a prepayment penalty

How to Evaluate a Daily Remittance Agreement

Before you sign any merchant cash advance contract, ask these questions:

What is the factor rate? (Anything above 1.40 deserves extra scrutiny)
Is the holdback a true percentage or a fixed daily ACH?
What is the estimated repayment term based on your average daily revenue?
Are there prepayment discounts if you pay off the balance early?
What happens if your revenue drops significantly — is there a reconciliation process?
What fees apply? (Origination, processing, or administrative fees add to the total cost)

A reputable funder will answer all of these questions clearly and in writing before you sign. If you're already finding the repayment terms difficult to manage, our guide on how to get out of MCA debt outlines practical options for small business owners in that position.

Exploring All Your Financing Options

Daily remittance MCAs are a powerful tool, but they're one option among many. Before committing, it's worth exploring whether a more affordable structure fits your business.

Traditional SBA-backed loans, for example, offer dramatically lower rates — and programs like the SBA 7(a) Express loan are accessible to more businesses than many owners realize. Visit SBA.gov to review current program details and eligibility requirements. If you prefer more flexible access to capital on an ongoing basis, a business line of credit may also be worth comparing against a daily remittance structure.

At Indymae, we work with small and medium-sized businesses to identify the financing structure that actually fits — whether that's a merchant cash advance with daily remittance, a term loan, or a path toward SBA financing. We believe in presenting your options transparently so you can make a confident, informed decision.

Final Thoughts

Daily remittance is neither inherently good nor bad — it's a financing mechanism that works well in the right context and can be costly in the wrong one. The key is understanding exactly what you're agreeing to: how much you'll repay in total, how much leaves your account every day, and whether your business can sustain that pace without disrupting operations.

Know your factor rate. Know your holdback percentage. Know whether your agreement is fixed or truly revenue-based. And always compare the total cost against alternatives before you commit.

Ready to explore your options? Visit Indymae to speak with a business lending specialist who can walk you through merchant cash advance terms, traditional loan structures, and everything in between. Your next funding decision should be one you understand completely — and feel confident making.