Average daily balance (ADB) is the mean of a business checking account’s end-of-day balance taken across every calendar day in the statement period, not just the days money moved. It answers the question an MCA underwriter actually cares about: how much cash does this merchant hold on a normal day, between deposits?
ADB matters because gross deposits can lie. A shop that deposits $50,000 on the 1st and draws it down to $200 by the 15th looks strong on deposits alone but has almost no cushion to absorb a daily remittance. A shop that keeps $10,000 in the account all month is the safer file — and ADB is the number that separates the two.
How it’s calculated
Take the closing balance for each day of the month, carrying the previous day’s balance forward on days with no transactions, sum those daily balances, and divide by the number of days in the period. It is a day-weighted average, so a one-day spike barely moves it — which is exactly why underwriters trust it more than a peak balance or a single big deposit.
What underwriters do with it
- Set the maximum advance and daily/weekly remittance the account can sustain.
- Confirm the merchant holds a minimum cushion (often 5%+ of monthly deposits).
- Cross-check it against negative days and NSFs to gauge cash-flow stability.