Most explanations of MCA repayment describe a single mechanism: a percentage of your bank deposits gets debited every business day. That is accurate for one of the two structures actually used in this industry, but it leaves out the other one entirely, and the difference changes what you should ask before you sign.
Both structures exist to do the same thing: collect the holdback share of your receivables toward the fixed payback amount (advance x factor rate). What differs is who is doing the collecting, and from where.
Split Funding: Collected at the Card Processor
With split funding, the MCA provider's agreement runs through your card processor, not your bank. Each time a customer pays by card, the processor routes an agreed share of that day's settlement to the MCA provider and deposits the remainder to your business bank account. The money never passes through your account on its way to the funder; the split happens upstream, at the processor.
Because the collection is tied to actual card settlements, a day with no card sales is typically a day with no split-funding payment at all. That is the main appeal: the mechanism tracks the transactions it is drawing from directly, with no separate debit step.
The tradeoff is dependence on the processor relationship. The provider's ability to collect assumes your card transactions keep running through the processor named in the agreement, sometimes formalized as a lockbox or processor agreement. Changing processors, closing your merchant account, or moving a meaningful share of sales to a different payment method can interrupt how the provider gets paid, which is exactly the kind of change a funding agreement usually asks you to disclose or get approval for first.
ACH Debit: Collected Straight From Your Bank Account
With ACH debit, the MCA provider skips the card processor and pulls the payment by electronic transfer directly from your business bank account, using the ACH authorization you sign at closing. The debit is unrelated to which processor handled a given sale, or whether the sale involved a card at all.
This is why ACH debit is the structure used for businesses with significant cash, check, or invoice-based revenue that never runs through a card processor in the first place: there is no card settlement to split, so the provider has to collect a different way.
ACH debit comes in two forms your contract will specify, and the difference matters on a slow day:
- A fixed amount debited on a set schedule (for example, every business day), regardless of that day's deposits. A slow day does not reduce it.
- A percentage of recent deposits, recalculated periodically against your actual bank activity. A slow day produces a smaller debit, closer to how split funding behaves.
See daily vs. weekly MCA payments for how the fixed-amount and percentage-of-deposits versions play out across a full week, and the holdback rate guide for how the percentage itself is set and negotiated.
Split Funding vs. ACH Debit, Side by Side
| Question | Split funding | ACH debit |
|---|---|---|
| Who collects it | Your card processor, under an agreement with the funder | The funder, by direct electronic debit from your bank account |
| What it draws from | That day's card settlement, before deposit | Your bank account balance or recent deposit history |
| A zero-card-sales day | Typically no payment that day | Depends on contract: fixed amount still debits, percentage-of-deposits shrinks |
| Works without card sales | No; requires card settlement volume | Yes; works for cash, check or invoice-based revenue |
| Affected by changing processors | Yes, often requires the funder's consent first | No; the bank account is the only thing that matters |
| Common paperwork name | Lockbox agreement or processor agreement | ACH authorization |
Some agreements combine elements of both, or shift from one to the other if a business's card-sales share changes materially. Always confirm which mechanism, or combination, applies to your specific contract rather than assuming from the funding amount or your industry.
How to Tell Which One Your Contract Uses
If you already have an MCA and are not sure which structure applies, check these two places:
- Your contract's payment section. Language about a processor, a lockbox, or a split percentage of card settlements points to split funding. Language about an ACH authorization debiting your bank account points to ACH debit.
- What actually triggered the debit. If the amount taken tracks your card batch for that specific day with no separate transfer visible in your bank activity, that is split funding. If a distinct electronic debit shows up in your bank statement apart from your deposits, that is ACH debit.
Before you sign, always ask:
- Is repayment split at my card processor, or debited from my bank account?
- If it is split funding, do I need the funder's approval before changing processors?
- If it is ACH debit, is the amount fixed or a percentage of recent deposits?
- What happens to the agreement if my card-sales share of revenue changes significantly?
What T.A.G. Business Funding Does (and Doesn't) Do
T.A.G. Business Funding is an independent business-funding ISO and broker, not a direct lender. We collect your application and pass your file to third-party funding sources, who provide the capital, set the repayment mechanism, and handle the underwriting.
- We do not set the collection method: whether your repayment is split funding, ACH debit, or a combination is decided by the funding source, not T.A.G. Nothing in this guide is an offer, quote, or promise of approval.
- We ask on your behalf: you can tell us which structure matters most to your business before accepting an offer, and we will ask the funding source to confirm it in writing before you sign.
- What we need to start: intake requires your four most recent complete, consecutive business bank statements. Personal, Cash App, Chime, and payment-processor statements are not accepted in their place.
- Credit checks: initial funding decisions are based primarily on your business's bank-statement cash flow, without a hard credit inquiry before the initial decision. Additional underwriting and credit checks, potentially including a hard inquiry, may occur before final funding.
Frequently Asked Questions
What is split funding on a merchant cash advance?
Split funding means your card processor divides each day's card settlement before it ever reaches your bank account: a set share goes to the MCA provider and the rest is deposited to you. The processor, not your bank, is the one doing the splitting, so the arrangement depends on your card transactions running through a processor the provider has an agreement with.
What is ACH debit repayment on a merchant cash advance?
ACH debit means the MCA provider pulls the payment directly out of your business bank account by electronic transfer, separately from however your customers paid you. It can be a fixed amount each business day or a percentage of your recent deposits, depending on the contract. Because it acts on the bank account, it does not depend on which card processor you use, and it works for businesses that take little or no card payment.
Which repayment method is better, split funding or ACH debit?
Neither is universally better; they shift different risks. Split funding ties the payment to actual card sales as they happen, so a no-card-sales day usually means no payment that day, but it can lock you into a specific processor. ACH debit is processor-independent and works for cash-heavy businesses, but a fixed daily ACH amount does not automatically shrink on a slow day the way a percentage-based arrangement does. Read the actual contract rather than assuming either structure.
Can I switch card processors if I have a split-funding agreement?
Often not without the funder's involvement. Split funding typically depends on a specific processor agreement that routes part of each settlement to the MCA provider, so moving to a new processor without telling the funder can break the repayment mechanism entirely. Ask your funding source what is required before you change processors while a split-funding MCA is active.
Does ACH debit still take money on a day with no sales?
If the ACH debit is a fixed dollar amount, yes, it is generally scheduled to occur regardless of that day's sales, which is the main cash-flow risk of a fixed ACH schedule. If the ACH debit is instead a percentage of recent deposits, a near-zero deposit day produces a near-zero debit. Your contract states which version applies.
How many bank statements do I need to apply?
Four: the four most recent complete, consecutive months of business bank statements, every page, nothing redacted. Personal, Cash App, Chime, and payment-processor statements are not accepted in place of business bank statements. Time in business is a separate requirement.
Will I need a hard credit check?
Initial funding decisions are based primarily on your business's bank-statement cash flow, without a hard credit inquiry before the initial decision. Additional underwriting and credit checks, potentially including a hard inquiry, may occur before final funding.
Ready to Compare Real Terms?
Tell your T.A.G. representative which repayment structure fits your business, and we'll confirm it with the funding source before you sign anything.
Start My Application →About this guide: T.A.G. Business Funding is an independent business-funding ISO and broker, not a direct lender. Funding is provided by third-party funders and is subject to their underwriting and approval. Repayment mechanism, amount and schedule are set by the funding source and stated in your contract. Last updated: 2026-10-26.