Glossary · pricing

Holdback percentage

Also called specified percentage, retrieval rate, split rate, purchased percentage.

The stated share of receipts a funder takes on each collection cycle — a measure of cash-flow strain and estimated speed of repayment, not a measure of cost.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

In a receivables purchase agreement this number appears as the "specified percentage" or "purchased percentage". It sets how fast the purchased amount is delivered, and therefore how long the deal runs. It says nothing about what the deal costs — that is the factor rate.

Four numbers define the transaction: the purchase price (what you receive), the purchased amount (what you deliver), the factor rate (purchased amount divided by purchase price), and the holdback percentage (how fast). Estimated term falls out of the last two together with your revenue:

Estimated term ≈ purchased amount ÷ (average daily receipts × holdback percentage)

Change only the holdback and the cost is unchanged and the term moves. That relationship runs the opposite way for effective annualised cost: a lower holdback stretches the term, and the same fixed dollar cost spread over a longer period produces a lower effective APR — while feeling cheaper day to day and costing exactly the same in dollars.

Reading an offer

  • Compare cost with the factor rate and the total dollars payable
  • Compare affordability with the holdback percentage against your gross margin, not your revenue
  • Ask whether the collection is genuinely percentage-based or a fixed amount described as a percentage of estimated receipts

Where this one catches people

Brokers negotiate the holdback down and present it as a discount. It is not one. Lowering the holdback from 15% to 10% does not reduce what you pay by a cent; it lengthens the time you spend paying it and lowers the daily bite. That can be exactly the right trade for a thin-margin business, but a merchant who accepts a longer term believing they got a price concession has been sold relief, not savings.

Worked through

Illustrative. Purchase price $50,000, factor rate 1.40, so the purchased amount is $70,000. Average daily receipts are $4,000 across 22 banking days a month.

At a 15% holdback: $600 a day. $70,000 ÷ $600 ≈ 117 business days, roughly 5.3 months.
At a 10% holdback: $400 a day. $70,000 ÷ $400 = 175 business days, roughly 8 months.

The cost is $20,000 either way. The second option takes $200 less per day and takes nearly three months longer.

Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.

Where you will meet this term

Merchant Cash Advance Revenue-Based Financing Credit Card Processing

Read next

Annual percentage rate (APR)The cost of financing expressed as a yearly rate that accounts for fees and for how long you actually hold th… Factor rateA multiplier applied to the funded amount that fixes the total dollars to be remitted. It is a price, not a r… Gross marginRevenue left after the direct cost of delivering the product or service, expressed as a percentage — the firs… HoldbackMoney withheld from what a business would otherwise receive and applied to an obligation — the daily slice of… Purchase priceWhat the funder pays for the receipts it is buying - the gross contract figure before fees and payoffs, which… Purchased amount (RTR)The total dollars of future receipts the funder has bought and is entitled to collect - a fixed figure set at… ReconciliationComparing what the funder actually collected against the percentage of receipts it was entitled to, and adjus…

Holdback percentage — common questions

What does holdback percentage mean?

The stated share of receipts a funder takes on each collection cycle — a measure of cash-flow strain and estimated speed of repayment, not a measure of cost.

Where does holdback percentage catch people out?

Brokers negotiate the holdback down and present it as a discount. It is not one. Lowering the holdback from 15% to 10% does not reduce what you pay by a cent; it lengthens the time you spend paying it and lowers the daily bite. That can be exactly the right trade for a thin-margin business, but a merchant who accepts a longer term believing they got a price concession has been sold relief, not savings.

Is holdback percentage the same as an interest rate?

Holdback percentage is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does holdback percentage apply to?

Merchant Cash Advance, Revenue-Based Financing, Credit Card Processing.

Is there a worked example of holdback percentage?

Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.

What else should I read alongside holdback percentage?

Annual percentage rate, Factor rate, Gross margin, Holdback, Purchase price.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.