Holdback is the portion of a merchant’s receipts a funder collects each day (or week) to repay an advance. It’s usually expressed as a percentage of daily card or bank receipts — commonly 10–20% — and stays fixed until the advance is paid off. Many modern advances collect a fixed daily/weekly ACH amount derived from that percentage rather than a live split of card sales.
Holdback vs. factor rate
The two are related but negotiated separately. The factor rate sets how much is repaid in total; the holdback sets how fast. A strong file might carry a 9% holdback at a low factor; a weaker file, a 15%+ holdback at a higher factor. Together they define the daily remittance the merchant’s cash flow has to absorb.
Why it ties to ADB: the daily holdback has to survive against the account’s average daily balance and existing positions. If the combined daily debits exceed what the account holds day to day, expect NSFs and negative days — the early signs of a deal going bad.