Rolling Reserve: Meaning in a Merchant Cash Advance
A rolling reserve is a percentage of each day's card sales that a processor holds back for a set period before releasing it. Processors use it to cover future chargebacks and refunds on accounts they consider higher risk.
What does rolling reserve mean?
Say a processor sets a reserve of a certain share of sales held for a number of months. Each day, that share of settled sales goes into the reserve instead of your bank. When each day's hold period ends, that day's reserve is released. The result is a steady slice of your sales always sitting with the processor.
Why does rolling reserve matter to your business?
A reserve lowers the deposits that reach your bank, which lowers the revenue a funder sees. It also ties up cash you'd otherwise use. If a processor adds a reserve suddenly, deposits drop overnight while a funder's daily debit stays the same, which is how some owners fall behind without any fall in sales.
What if your processor adds a reserve?
- Ask the processor what triggered it and what would end it.
- Tell your funder right away if deposits drop, and ask about reconciliation.
- Keep your chargeback rate low so the reserve can be reduced.
How do you explain it to a funder?
Send the processor's notice and a processing statement showing the reserve line. That lets an underwriter add the held amount back when judging your real sales.
Where will you see it?
In your processor agreement and in any notice of a change to your account terms. On processing statements, as a line for reserve held and reserve released. In a funder's questions about why deposits fell.
Which terms are related to rolling reserve?
The full list is in the glossary. Owners ask about this in Do cash deposits count toward an MCA?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.