Underwriting a merchant cash advance is a search for reasons not to fund. A merchant brings a big deposit number; your job is to find what that number is hiding. Almost every decline traces back to one of the patterns below — and each one is visible on the bank statement if you know where to look.
1. Existing positions that already eat the daily cash
The first thing to size up is what the merchant is already paying. Fixed daily ACH debits to lender-sounding names are existing MCA positions, and they repay out of the same deposits your advance will. Add them up: if current remittances plus yours leave little working cash, the deal is over-leveraged regardless of gross deposits. Several small positions stacked together are as dangerous as one large one — see how to detect stacking.
2. A rising trend of NSFs and negative days
A few isolated NSFs happen to healthy businesses. What matters is the direction: NSFs or negative days climbing month over month say the business is losing its cushion, and adding a fixed remittance will accelerate it. Weight the most recent month most heavily. (Tally it fast with the NSF & negative days checker.)
3. Deposits inflated by transfers and self-funding
Gross deposits routinely include money that isn’t revenue — transfers between the merchant’s own accounts, owner injections, loan or advance proceeds, and reversed payments. Sizing an advance on that inflated number over-funds the deal. Strip it down to true revenue before you decide anything. Large, round, irregular credits that don’t match the business’s normal sales rhythm are the tell.
4. Deposits concentrated, balance drained between them
A statement that spikes on a few deposit days and drains to near zero between them has a low average daily balance even if the monthly total looks healthy — there’s no cushion to absorb a daily remittance. A steady stream of many smaller deposits reads far safer than a few lumpy ones.
5. Delayed, split, or skipped payroll
Payroll is the obligation a business protects first. When it starts posting late, in pieces, or skips a cycle, the business is under real cash strain — a leading indicator that shows up before the NSFs do.
6. Negative or declining month-over-month revenue
Reading a single month tells you where the business is; reading three to six tells you where it’s going. Falling true revenue, shrinking balances, or a growing debit load across the period is a trajectory red flag even when the latest month still clears a buy box.
Next, learn to separate real sales from noise in how to read a bank statement for MCA, or see the whole process in how MCA underwriting works.