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What is a Holdback Rate and how does it work?

A Holdback Rate is the amount of money that Behalf does not immediately fund, out of the seller’s* shipped orders amount, due to expected refunds or other deductions from your Amazon payout.

How it works:
– Behalf sets up reserve accounts to hold back a certain amount of money based on the “Holdback Rate” as outlined in Behalf’s Daily Factoring Payout contract.
– This money is used if the seller* is required to indemnify Behalf (for example, due to a dispute between the seller and the account debtor) or otherwise owes money to Behalf (Exhibit A of the Behalf Factoring Agreements).
– The funds held back are released to the seller if the account debtor pays in full or as otherwise negotiated in the factoring agreement.

*Seller = Factoring Merchant.

 

How does the funds flow work with the Holdback Rate and Factoring Rate deduction taken into account?

Here’s an example that illustrates how the funds flow works on a daily basis.

Example: On $100,000 in daily shipped orders, net of refunds and returns (Account Receivable), Behalf will fund 90% of the Account Receivable ($90,000) with a 1% Factoring Rate deducted from the funded amount (0.01 x $90,000 = $900) where 90% of that fee (i.e. 0.9 x $900 = $810) is deducted from the advanced amount, and the remaining 10% of that fee (0.1 x $900 = $90) will be deducted from the repayment when received from Amazon.

Assuming no unexpectedly high return rate occurs, the seller will be refunded the
$10,000 hold-out, less the owed factoring fee (i.e. $10,000 – $90 = $9,910) once the
payment from Amazon to Behalf is completed.

 

What happens if a day is ‘negative’ on net sales (total refunds amount exceed total shipped orders revenue)?

When a day is ‘negative’ on net sales, Behalf will carry over the negative net sales total to the next day.

Example: If on day 2 the net sales are -$20,000, then Behalf will not advance any amount for that day.

Assuming net sales on day 3 are $100,000, the total accumulated net sales of day 3 would be $80,000 ($100,000 – $20,000 in negative net sales from day 2).