Split Funding
Split funding is the MCA repayment mechanism where the merchant's payment processor automatically diverts a percentage of each card transaction to the funder before depositing the remainder to the merchant — providing the cleanest revenue-share repayment structure with lowest collection risk.
Why This Matters
Split funding is the historical MCA repayment model and remains the lowest-risk structure for funders. The mechanics: at funding, the merchant authorizes their card processor to split each card transaction — typically 8-25% to the funder, the remainder to the merchant. Repayment scales automatically with revenue (heavy revenue days produce heavy payments, slow days produce light payments), eliminating the merchant cash management challenges of fixed daily ACH deductions. Split funding requires processor partnership and merchant consent to processor change or addition. ACH-based MCA (without split) became dominant because it doesn't require processor cooperation but carries higher collection risk.
Frequently Asked Questions
Frequently Asked Questions
Why isn't all MCA structured as split funding?
Split funding requires processor cooperation and merchant willingness to use specific processors. ACH-based MCA can be funded with any merchant regardless of processor. The trade-off: ACH MCA expanded the addressable market dramatically but carries higher collection risk than processor-based split funding.
What MCA programs use split funding today?
Processor-integrated MCA programs from Square Capital, Stripe Capital, Shopify Capital, PayPal Working Capital, and Amazon Lending all use split-funding repayment. Standalone MCA funders increasingly offer split-funding options through processor partnerships as alternative to ACH structures.