How does the Pay reserve work and when will it be used? How does the Pay reserve work and when will it be used?

How does the Pay reserve work and when will it be used?

The Pay reserve exists as a safeguard in case a buyer fails to repay Capchase. 

The reserve requirement is determined during our underwriting process and will be set in accordance with the general risk profile of your Company’s financial metrics.

Your required reserve ($/€/£) is calculated based on the reserve rate and the total contract value of your active subscriptions. You will never need to provide a starting reserve balance; the reserve required will be automatically held back from each subscription payout at the time of subscription creation.

How are reserve rate changes applied?

If the reserve rate changes, the new reserve rate will be applied only to new subscriptions. Subscriptions initiated and active prior to the reserve rate change will not be impacted or used to determine your new reserve balance.

When is the reserve balance used?

The reserve is used once a subscription has gone delinquent (DQ) for at least 30 days. On Day 31 after a buyer fails to pay, Capchase will automatically deduct the defaulted amount of the delinquent subscription from the reserve account. If the reserve account doesn’t cover the defaulted amount, the required subscription repayment will be met by debiting the vendor’s bank account.

Note that from the first day of non-repayment until Day 60, Capchase will continue to make attempts to recover payments from the buyer unless explicitly instructed not to collect from the buyer by the vendor.

How is the reserve refilled?

The reserve can only be refilled via new subscriptions by holding back more of a new subscription’s payout amount. Capchase does not debit vendors to supplement the reserve.

When is the reserve released?

The reserve is released once a subscription matures or once all repayments for a given subscription are made, assuming the reserve balance is greater than the reserve required at the time of subscription maturity.

Is the reserve on the vendor’s balance sheet?

No, the reserve balance is on Capchase’s balance sheet and is held in bank accounts controlled by Capchase Inc.

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