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Remittance
Also called daily debit, ACH debit, payment, collection.
The periodic transfer of purchased receipts to the funder - taken by ACH debit from the operating account, by a split of card settlement, or through a lockbox the funder controls.
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What it means
Three collection methods, with different consequences.
- ACH debit. The funder debits the operating account on a schedule under an authorisation signed at closing. Simple, and it is why processing arrangements no longer matter to most advances.
- Split funding. The card processor diverts an agreed percentage of each batch before the remainder settles to the business. Self-adjusting with volume, and requires the processor's cooperation.
- Lockbox. All customer payments are directed to an account the funder controls, which takes its share and forwards the rest. Standard in factoring and asset-based lending, rare in advances.
Debits run on banking days, so weekends and federal holidays shift them. Failed remittances are usually re-presented, and agreements set how many attempts are permitted and what fee attaches to each.
The authorisation itself is a separate document from the funding agreement, and revoking it at the bank does not touch the underlying obligation.
Where this one catches people
Revoking the ACH authorisation or placing a stop payment does not cancel anything - it converts a payment problem into a contract breach. Blocking the debit is a listed event of default in nearly every agreement and a listed breach under nearly every performance guarantee, which makes it the specific act that moves liability from the business to the owner personally. If the payment is unaffordable, the reconciliation request and the restructure conversation both have to happen before the debit fails, not after.
Where you will meet this term
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Remittance — common questions
What does remittance mean?
The periodic transfer of purchased receipts to the funder - taken by ACH debit from the operating account, by a split of card settlement, or through a lockbox the funder controls.
Where does remittance catch people out?
Revoking the ACH authorisation or placing a stop payment does not cancel anything - it converts a payment problem into a contract breach. Blocking the debit is a listed event of default in nearly every agreement and a listed breach under nearly every performance guarantee, which makes it the specific act that moves liability from the business to the owner personally. If the payment is unaffordable, the reconciliation request and the restructure conversation both have to happen before the debit fails, not after.
Is remittance the same as an interest rate?
Remittance 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 remittance apply to?
Merchant Cash Advance, Working Capital, Invoice Financing, Revenue-Based Financing.
Is there a worked example of remittance?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside remittance?
Event of default, Lockbox, NSF fee, Payment frequency, Performance guarantee.
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.