How it works in practice
A reserve is expressed as a percentage held for a number of months. Each day’s settlement contributes to the reserve, and each day the balance from the corresponding day one period earlier is released. Once the cycle matures, money comes out at roughly the rate it goes in.
The cash flow consequence nobody plans for
The painful part is the ramp. During the first months, money goes in and nothing comes out, so a growing merchant is financing the reserve out of working capital at exactly the moment it is buying inventory. Model this before signing, not after.
Negotiating it down
Reserves are usually reviewable. Clean dispute history, verifiable fulfillment, and time are the three things that move the number. Ask at signing what the review schedule is and what metrics trigger a reduction, and get the answer in writing.