MCA underwriting: how funders check the statements before they fund

MCA underwriting is how a merchant cash advance funder checks a business before buying part of its future sales. The underwriter reads the application and the last few months of business bank statements. From the statements, they work out true revenue, daily balances and what the business already pays other funders. Those numbers set the size of the advance and the daily or weekly payment.

What the underwriter decides on an MCA deal#

A merchant cash advance is usually written as a purchase, not a loan. The funder pays the business a sum now and buys a larger amount of its future sales. Several state laws call this an accounts receivable purchase. Florida's law defines it as a business selling some of its receivables at a discount to their expected value. Georgia, Kansas, Missouri and Utah use nearly the same words.

The funder gets paid in one of two ways. It can take a fixed share of the merchant's sales as they come in. Or it can debit a fixed amount each business day or week. With a fixed debit, the funder adjusts the amount from time to time so it matches a share of actual sales. Connecticut's law names both forms as sales-based financing.

The underwriter's questions follow from how the funder gets paid. Does money come in on most days, and is it really sales? How much stays in the account between deposits? How much do other funders already take? The answers set the advance, the share of sales, the payment and an estimated term.

Many funders also sort files into paper grades, from A for the strongest down to D. Lower grades cost the merchant more, and some files are declined. The grade rests partly on the statement figures, so the review has to be right first.

What's in an MCA deal file#

Many files reach the funder through a broker, often called an ISO (independent sales organization). MCashAdvance, a funder, lists 3 to 6 months of business bank statements among the documents its underwriters review. The table shows a typical file and what each document is checked against.

The statement checks, in the order underwriters run them#

Your credit policy sets the limits, such as the most NSF (non-sufficient funds) fees you accept in a month. The statement review produces the numbers you compare with those limits. Start with the first two checks. If a month is missing or a running balance doesn't add up, every number in the later checks is wrong.

• Every month and page is thereThe statements cover consecutive months with no gaps, up to the latest full month. A missing month makes every average wrong.
• The balances add upEach running balance equals the one before it, plus the credit or minus the debit. If one doesn't, check that page or row.
• True revenue, month by monthTotal deposits minus the deposits that aren't sales. Transfers between the merchant's own accounts, loan and advance proceeds, and refunds come out. Transaction categorization covers how each line gets sorted.
• Deposit countHow many deposits arrive each month. A daily payment needs money coming in on most business days.
• Average daily balanceThe average end-of-day balance across the month. It shows how much money is usually there to cover the daily payment.
• Negative days and NSF feesHow many days the account closed below zero, and how many NSF or overdraft fees the bank charged.
• Existing positionsFixed daily or weekly debits to other funders, and recent funding deposits from them. Each one should be on the application.
• The trendThe latest month against the average. A falling month means the advance will take longer to collect.

The same checks apply to other small business loans, with different limits. Bank statement verification for business loans covers that side. Lenders that judge a loan on the same bank data call it cash flow underwriting.

Worked example: true revenue and what's already committed#

The calculator starts from a three-month file. Change any number to match one of your own deals.

In the starting file, deposits run $84,200, $91,650 and $78,900. Take out the deposits that aren't sales, and true revenue is $72,200, $82,150 and $63,650. That averages $72,667 a month. The merchant already pays $6,300 a month on loans and other advances. So 8.7% of average monthly sales is already committed before your offer.

Get month 3 explained before you make any offer. True revenue fell about 23% from month 2, and almost a fifth of that month's deposits weren't sales. Ask the broker what those deposits were and whether sales have recovered.

Turn each funder's daily or weekly debit into a monthly figure before you enter it. To test your own offer, add its expected monthly payment to the "Existing loan and MCA payments per month" box. Then read the new share.

How existing positions show up on a statement#

An existing advance leaves two marks on a statement. The first is the funding deposit, a large credit from the funder. The second is the payment, the same debit to the same payee every business day or every week. The description often carries the funder's name or a short code for it.

The amount can change over time. Funders that adjust payments to actual sales change the debit now and then, so a new amount isn't always a new advance. Read the payee and the timing before you count a second position.

List every position you find. Note the funder, the amount, how often it's debited and when it started. Then compare the list with the positions on the application. A position the application doesn't mention goes back to the broker as a question. If your advance will pay off a current one, ask for that funder's payoff letter, and check its balance against the debits you can see.

Funding deposits come out of true revenue too. An advance deposited in month 2 isn't sales, even when it's the largest credit that month.

State disclosure laws that apply to MCAs#

The eleven states below have commercial financing disclosure laws that apply to MCAs. Each law covers sales-based financing or the purchase of a business's receivables. Louisiana's law calls it revenue-based financing. MCA contracts usually take one of these forms. We checked each law on the state's own statute, legislature or regulator page on October 6, 2026. Check for newer laws in the states where you fund.

Two of these laws say how the monthly sales figures from your statement review go into the disclosure. In New York and California, a funder can estimate the merchant's future sales by the historical method. That estimate is the merchant's average monthly sales over a fixed look-back of 4 to 12 months. It counts the sales that come through the account or payment channel the advance collects from. The funder sets the period by policy and uses it for all deals, or for all deals in one industry or of one financing amount. The estimated term and APR on the disclosure are worked out from those averages. Keep the monthly figures in the file, with the statements behind them.

California also allows an underwriting method, built on the funder's own sales projection. A funder that uses it must audit its paid-off deals every four months. New York's alternative is the opt-in method, and funders that use it report to the regulator by April 30 each year.

Texas limits how the payment is collected. Since September 1, 2025, a provider can't set up automatic debits from the merchant's deposit account without a perfected, first-priority security interest in that account. This rule has no dollar limit. The details differ by state, so confirm them for your deals with counsel.

What software should do, and what stays with the underwriter#

Most of the statement review is reading and arithmetic. Software can do that part and leave the judgment to the underwriter. This is how a deal file moves through Docsumo.

1. Take in the fileFiles from broker emails arrive in a Docsumo inbox. Files can also come in by upload or through the API. AI Split takes a plain-English definition of each document type and separates a combined PDF into its documents.
2. Read every transactionStatement tables that run across pages are joined into one table, with the headers mapped.
3. Check the mathEach transaction is checked against the statement's running balance.
4. Run your own rulesYou set up your true-revenue rule and policy limits as workflow steps. Each step uses an LLM (a large language model) or your own Python code. Cross-document checks, such as the application's business name against the account holder, are on the Enterprise plan.
5. Ask for what's missingThe Document Collection and Email agents can email the broker for a missing month of statements.
6. Send the exceptions to a personLow-confidence fields go to your reviewers. A reviewer clicks a field to see its source line. Approved data goes to your systems through the API and webhooks.

Case management and automated workflows are on the Enterprise plan, and so is cash flow analytics. The pricing page lists what each plan includes. Document AI for lending shows the other lending files the same setup reads.

Grid Finance, a Dublin lender whose products include a merchant cash advance, uses Docsumo for the bank statements in its loan applications. Each complex statement takes under a minute, at 94%+ accuracy. The Grid Finance story has the details, and AI bank statement analysis explains the method.

Two limits matter here. Docsumo doesn't connect to the merchant's bank account the way aggregators such as Plaid do. It reads the statements the merchant provides. It's also software, not a review service, so your own team works the exceptions.

Our take. An underwriter shouldn't have to read every row of every statement to find the few lines that decide a file. We think AI agents should check the whole deal file against the rules your team sets. They should send the underwriter only the checks that failed. That could be a missing statement month, a running balance that doesn't add up, or revenue far from what the application states. Each failed check should come with the transactions that show it. The decision to fund, and on what terms, stays with the person who signs off.

If your underwriters still add up deposits by hand#

Pick ten recent files, both funded and declined, and note how long the statement review took on each. Then run the same files through Docsumo and compare what reached the underwriter. The comparison shows how much of the review was reading and adding up.

Book a demo with a few of your own deal files, or start a free trial.

Frequently asked questions#