Payment holidays
A pause can protect cash during a slow stretch, but it is not free on every product. Whether it costs anything depends on one question: is your total payback fixed, or does interest keep running?
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Updated October 13, 2026 · Merchant Fund Express
A payment holiday (also called a deferral or a pause) stops scheduled payments for a set period. On a fixed-total product, such as a merchant cash advance or most revenue-based funding, the amount you owe usually stays the same and the end date moves later. On an interest-bearing loan, interest normally keeps accruing during the pause, so the total cost goes up even though you paid nothing for a few weeks.
Either way, a pause must be agreed in writing. Simply letting debits fail is not a payment holiday; it is a missed payment, with fees and possible default terms. If your revenue has dropped, read MCA reconciliation as well, because adjusting the payment to actual sales can fit better than stopping it.
Assumptions: $50,000 funded Friday, October 30, 2026, factor rate 1.30, so total payback is $65,000. The payment is $500 per business day for 130 debits, starting Monday, November 2, 2026, skipping bank holidays (Veterans Day, Thanksgiving, Christmas, New Year’s Day, Martin Luther King Jr. Day and Presidents’ Day).
| No pause | With pause | |
|---|---|---|
| Total payback | $65,000.00 | $65,000.00 |
| Pause | None | 10 business days, Mon Jan 4 to Fri Jan 15, 2027 |
| Payments skipped during pause | 0 | 10 × $500 = $5,000.00, moved to the end |
| Last debit | Mon May 10, 2027 | Mon May 24, 2027 |
| Deferral fee | n/a | $0 in this example; ask if your agreement has one |
| Total cost | $15,000.00 | $15,000.00 |
The total cost does not change. What changes is that the advance runs two weeks longer, so the next renewal or payoff conversation also moves two weeks later.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
Assumptions: a term loan with a $40,000 balance on January 1, 2027, interest of 1.5% per month on the balance, a regular monthly payment of $3,600 due on the 2nd, and a two-month deferral covering the February and March payments. Interest accrues and is added to the balance during the pause (simple monthly figures).
| Line | Amount |
|---|---|
| Balance on Jan 2, 2027 after the January payment | $40,000.00 |
| Interest for February ($40,000 × 1.5%) | $600.00 |
| Interest for March ($40,600 × 1.5%) | $609.00 |
| Balance when payments restart on Fri Apr 2, 2027 | $41,209.00 |
| Extra principal created by the pause | $1,209.00 |
| Approximate added interest over the rest of the term at 1.5% on that $1,209 for about 11 months | about $200 |
So the pause costs roughly $1,400 in this example, and either the payment rises or the term grows. Ask the funder to show you both versions in writing before you accept.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
Expect a short written explanation of the cause and how long it lasts, your most recent business bank statements as PDFs, month-to-date activity, and sometimes evidence such as a repair invoice, an insurance claim or a contract showing when a receivable pays. The clearer the end date, the easier the request is to read.
If the dip is long, a pause may be the wrong tool. Compare it with a reconciliation, a lower daily payment or a refinance, and run the numbers in the payment burden calculator. If you want to see what a restructured file could look like, start with the qualification check; it uses a soft pull.
It depends on the product and on whether the funder reports. An agreed pause in writing reads very differently from missed payments. Ask how it will be recorded.
The total payback usually stays the same, so there is often no added cost unless the agreement has a modification fee. The advance simply ends later.
A pause usually pushes renewal timing back, because renewals are generally based on how much has been paid. See MCA renewal timing.
Ask about a reconciliation or a lower payment instead, and keep paying while you ask. Read what happens in a default so you know what to avoid.
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