Split Funding (Split Withholding)
Split funding is a merchant cash advance repayment method where the funder collects its share directly from the merchant's card-processing settlements. The processor splits each batch of credit-card sales, routing a set percentage to the funder before the remainder reaches the merchant, so repayment tracks actual sales volume.
How Split Funding Works
When a merchant cash advance is repaid by split funding, the merchant's credit-card processor is instructed to divert an agreed percentage of every settlement batch to the funder. The merchant receives the rest. Because the split is a share of sales, the dollar amount collected rises and falls with the business's daily card volume.
Split Funding vs Fixed ACH
The alternative is a fixed daily or weekly ACH debit of a set dollar amount regardless of sales. Split funding is gentler on a merchant in a slow period (it collects less when sales are low) but depends on the processor relationship; fixed ACH is simpler to administer but can overdraw a merchant when sales dip, which is the most common cause of a bounced remittance.
Why Funders Use It
Split funding aligns repayment with the merchant's cash flow and collects at the source, which can reduce missed payments compared with a debit that hits a possibly-empty bank account. It does require integration with the merchant's processor, and the funder still has to reconcile the split remittances against the expected repayment.
Servicing Split Remittances
Whether by split funding or ACH, the funder has to match many small, variable remittances back to the right advance and flag shortfalls. Zolvo reconciles daily and weekly remittances and detects missed payments through payment matching for merchant cash advance portfolios.
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