the error in the example is that the companies that do add on don't give the same or higher offer ont he add on. They essentially give the merchant what they have paid back (thus the deal works like a true credit line).

Now if in reviewing updated statements, the sales have gone up, well, the credit line would go up. Likewise if sales drop.

Once a merchant has a strong repayment history, then you can extend the deal (from 6 to 8 months, 8 to 10 or 12, etc), which would also offer more money.