Merchant Loans and Cash Advances: Broker Checks 2026

Identify the Actual Contract

Identify the borrower’s legal obligation before relying on a label such as merchant cash advance or revenue based business loan. A loan requires repayment under its contract. A receivables purchase instead concerns the sale of specified amounts owed to the business, with the seller’s remaining obligations set by that agreement.

Read who provides the funds and what the business must repay. For a receivables arrangement, locate what is being sold, who carries the risk of non-payment and when the provider can recover money from the business. Record any security or personal guarantee separately from the collection method.

Tyro business loans use a merchant cash advance model repaid from card sales, with obligations documented as a loan. Tyro’s Business Loan terms require repayment of the total amount and authorise daily settlement deductions. Its separate Flexi Loan contract also uses sales-linked collection, so match the signed product name to its terms.

The Australian Securities and Investments Commission (ASIC) explains that National Credit Code coverage depends on the debtor and purpose, among other conditions. Do not assume consumer credit rules apply merely because a sole trader signs the contract. Record the actual use of funds before deciding which requirements apply.

Advance, Fee and Sales Deductions

Separate the money received from the total amount repayable and the percentage collected from sales. The collection percentage determines cash withheld from trading, while the fee determines the agreed funding cost.

Read the offer for the following amounts:

• Funds actually advanced to the business, after any upfront deductions.
• The fee and total repayment amount, including any additional contractual costs.
• The deduction percentage and the sales or settlement amount to which it applies.
• Minimum payments, their measurement periods and the treatment of early repayment.

In a hypothetical offer, a business receives $40,000, pays an $8,000 fixed fee and owes $48,000 before any additional costs. A factor of 1.20 produces that same total if it multiplies the advance. Neither the factor nor the 20% fee is a 20% annual interest rate.

An annual reducing-balance interest rate applies over time to the balance still owing. A fixed fee needs a repayment schedule before you can compare its annualised cost with that rate. Faster collection brings the same fixed fee into a shorter period unless the contract provides a rebate.

At a hypothetical 15% collection rate, $20,000 of eligible weekly sales produces a $3,000 deduction. The business retains $17,000 before payment-processing fees, refunds and other adjustments. Use the contract’s definition of eligible collections when modelling the actual offer.

Test Lower Sales and Minimum Obligations

Lower sales reduce a percentage-based deduction, but a minimum repayment can still require a cash top-up. Test the sales decline against each contractual measurement period.

For the same hypothetical 15% collection rate, weekly eligible sales falling from $20,000 to $12,000 reduce the deduction from $3,000 to $1,800. Cash retained falls from $17,000 to $10,200 before other settlement adjustments. The lower repayment does not compensate for the lost sales.

Tyro’s Business Loan terms require at least 5% of the loan amount, defined as principal plus fee, in each consecutive 30-day period. A shortfall must be repaid immediately. Excess payments in one period do not reduce the minimum in later periods.

The Tyro Flexi Loan terms instead set the minimum amount in the Loan Summary, with consecutive 30-day repayment periods. Do not copy the Business Loan minimum into a Flexi Loan assessment.

For an illustrative contract with a $2,400 minimum over 30 days, $10,000 of eligible settlements collected at 15% produces only $1,500. The business needs another $900 to meet that minimum. This example is an assumed offer, not a Tyro quote.

PayPal has a different timetable. Its Working Capital minimum repayment rule requires 5% or 10% of the loan plus fee every 90 days, depending on the selected terms. This is why each provider’s minimum must be read separately.

Also inspect obligations to keep processing sales through the provider and any default remedies. Tyro’s Flexi Loan contract restricts steps that materially reduce daily settlements and requires the settlement account to remain with Tyro. Redirection of sales is not a substitute for an agreed repayment arrangement.

Reconcile the Existing Commitment

Reconcile gross sales to net bank receipts before assessing the business’s income and debt payments. Sales reported by the payment provider and the resulting bank credit are two views of the same receipts.

For a hypothetical settlement, $10,000 of gross card sales less $200 of processing fees and a $1,500 funding deduction leaves an $8,300 bank credit. Counting both the $10,000 sales report and the $8,300 credit would incorrectly record $18,300 of revenue.

Obtain the settlement reports and match their net transfers to the bank account. Then reconcile funding deductions against the provider’s liability statement, including manual payments and refunds. Keep the original funding advance separate from trading income.

Show the funding deduction once in the cash-flow assessment. If your starting figure already uses receipts after that deduction, do not subtract it again without adjusting the starting figure. Keep the principal balance and fees distinct from the business’s operating costs.

Finish with a record showing the outstanding commitment, actual collection rate and any minimum-payment shortfall. Compare that record with the lower-sales forecast before recommending more funding or assuming that daily deductions clear the existing obligation.