Split Funding
Split funding is an MCA repayment structure where a portion of a merchant's credit card processing receipts is automatically routed to the funder through the payment processor before the merchant receives the remaining net deposit — the original MCA repayment mechanism, predating ACH-based alternatives.
Why This Matters
Split funding (also called processor split) was the foundational MCA repayment structure when the product emerged in the late 1990s and 2000s. The mechanics: the merchant's payment processor (or a designated split processor) takes a fixed percentage of every card transaction and routes it to the funder, with the remainder flowing to the merchant as net deposit. Split funding requires processor cooperation — funders maintain split agreements with major processors. The advantages are real-time revenue visibility and elimination of bounce risk; the disadvantages are operational complexity and limitation to card-heavy merchants.
Example
Restaurant doing $80K/month in card sales takes $40K advance at 18% split. Every credit card swipe routes 18% to the funder before merchant deposit: $14,400/month average to funder, balance to merchant. At 1.30 factor, $52K payback in roughly 3.6 months at average revenue. Faster if peak season hits, slower if revenue slows.
Frequently Asked Questions
Frequently Asked Questions
Is split funding still common in MCA?
Less common than 10 years ago. ACH split has overtaken processor split as the dominant mechanism because ACH works for non-retail merchants and avoids processor coordination overhead. Split funding remains common in restaurant, retail, and other card-heavy verticals where processor visibility into revenue is highly valuable to funders.
What processors support MCA split funding?
Most major processors have split capabilities or work with split-processor intermediaries (Reserve, Maverick, Riverside, etc.). Direct relationships exist with First Data, Worldpay, TSYS, Heartland, and most ISO processor networks. Funders maintain a list of supported processors as part of underwriting capability.