How to Underwrite an MCA Deal: A Step-by-Step Guide for Brokers
How to Underwrite an MCA Deal: A Step-by-Step Guide for Brokers
Underwriting an MCA deal doesn't have to mean spending hours digging through bank statements and trying to piece together a merchant's financial picture.
But it does require more than simply looking at monthly revenue.
A strong MCA review should answer a much bigger question:
Can this business realistically handle another funding obligation?
To answer that, brokers and underwriters need to look at revenue, cash flow, existing positions, NSF activity, balances, payment obligations, and financial trends.
This guide walks through a practical MCA underwriting process from the moment you receive the bank statements to the moment you're ready to submit the deal.
What Is MCA Underwriting?
MCA underwriting is the process of evaluating a business's financial activity to determine whether a merchant may be suitable for revenue-based financing.
Unlike simply looking at a business's stated revenue, underwriting examines the actual movement of money through the business bank account.
A typical review may include:
- Monthly revenue
- Deposit consistency
- Average daily balance
- Ending balances
- Cash flow
- NSF activity
- Negative balance days
- Existing MCA positions
- ACH withdrawals
- Payment burden
- Revenue trends
- Unusual transactions
- Overall risk signals
The objective isn't simply to find problems.
It's to understand the entire financial picture.
Step 1: Collect the Bank Statements
The first step is getting enough information to properly evaluate the business.
For many MCA deals, brokers will receive several months of business bank statements.
Before analyzing anything, verify that the statements:
- Belong to the correct business
- Cover the required period
- Are readable
- Include transaction details
- Include beginning and ending balances
- Don't appear incomplete
- Match the information provided on the application
Incomplete information can create problems later in the underwriting process.
Start with clean data.
Step 2: Calculate and Verify Revenue
Revenue is one of the first numbers an MCA broker will look at.
But don't simply accept the revenue number provided by the merchant.
Review the actual deposits appearing in the bank account.
Look at:
- Total monthly deposits
- Average monthly deposits
- Revenue consistency
- Month-over-month trends
- Large or unusual deposits
A business generating $100,000 in deposits every month tells a very different story from a business generating:
- $140,000
- $125,000
- $105,000
- $85,000
- $70,000
- $60,000
The average might still look respectable.
But the direction of the business is telling you something.
Look for the trend.
Is revenue:
- 📈 Increasing?
- ➡️ Stable?
- 📉 Declining?
A consistent decline deserves additional investigation.
Step 3: Analyze Cash Flow
Revenue is money coming into the account.
Cash flow tells you more about what happens afterward.
Look at:
- Beginning balances
- Ending balances
- Average balances
- Operating expenses
- Recurring withdrawals
- Transfers
- Debt payments
- Available liquidity
A merchant can generate significant revenue while still experiencing cash-flow pressure.
For example:
Merchant A
- $100,000 monthly deposits
- Strong ending balances
- Low existing obligations
- Few NSFs
Merchant B
- $100,000 monthly deposits
- Low ending balances
- Multiple ACH obligations
- Frequent negative balances
Same revenue.
Completely different financial picture.
Step 4: Review NSF Activity
NSFs and negative balances can provide important insight into a merchant's cash-flow health.
Look for:
- Number of NSFs
- Frequency
- Timing
- Negative balance days
- Whether NSF activity is increasing
- Whether the merchant recovers quickly
One isolated NSF doesn't necessarily tell you much.
A recurring pattern can be much more significant.
That's why trends matter more than isolated events.
For a deeper look at common warning signs, check out our guide: MCA Red Flags: 15 Things Underwriters Look for Before Funding a Merchant
Step 5: Identify Existing MCA Positions
This is one of the most important parts of the underwriting process.
A merchant may have strong revenue but already be carrying multiple financing obligations.
Look for recurring withdrawals that may represent:
- Existing MCAs
- Business loans
- ACH obligations
- Equipment financing
- Other recurring debt payments
Pay particular attention to:
- Payment amount
- Payment frequency
- Payment cadence
- Company receiving the payment
- How long the payment has been occurring
Multiple recurring financing payments can indicate potential stacking.
But remember:
Not every ACH withdrawal is an MCA payment.
Payroll, rent, insurance, vendors, utilities, taxes, and other legitimate business expenses can also appear as recurring ACH transactions.
Context matters.
Step 6: Calculate Payment Burden
Once potential existing positions have been identified, determine how much of the merchant's cash flow is already committed.
For example:
- Position #1: $350/day
- Position #2: $275/day
- Position #3: $425/day
Total: $1,050 per day
That's a significant obligation that needs to be evaluated against the merchant's actual revenue and cash flow.
Don't just ask:
"How much does the merchant make?"
Ask:
"How much of that money is already committed?"
That question can completely change how a deal is positioned.
Step 7: Look for MCA Stacking
MCA stacking occurs when a merchant has multiple active revenue-based financing positions at the same time.
Stacking isn't automatically synonymous with a bad deal.
Instead, it's a signal that deserves further investigation.
Look for patterns such as:
- Multiple recurring ACH payments
- Several financing companies
- Multiple daily withdrawals
- Multiple weekly withdrawals
- Recently added obligations
- Increasing payment burden
- Declining balances
- Increasing NSF activity
The combination of these signals can be more meaningful than any single transaction.
For a deeper breakdown, read: MCA Stacking: How to Detect Existing Positions Before Submitting a Deal
Step 8: Examine Revenue Consistency
Two businesses can have the same average monthly revenue while having very different levels of consistency.
Consider:
Business A
- $95K
- $98K
- $102K
- $97K
- $100K
- $99K
Business B
- $150K
- $120K
- $105K
- $80K
- $65K
- $50K
Both may produce substantial revenue.
But the second business is showing a significant downward trend.
Revenue consistency matters because MCA underwriting isn't just about how much money came in.
It's about the behavior of the business over time.
Step 9: Investigate Unusual Deposits and Transfers
Not every deposit necessarily represents normal operating revenue.
Underwriters should investigate unusual activity such as:
- Large one-time deposits
- Transfers between related accounts
- Investment proceeds
- Loans
- Cash injections
- Unexplained deposits
- Large internal transfers
Similarly, excessive transfers between accounts can make it harder to understand the merchant's true operating cash flow.
The goal is to distinguish actual business revenue from other sources of funds.
Step 10: Compare the Application With the Statements
This is an extremely important step.
The information provided by the merchant should make sense when compared against the bank statements.
Look for inconsistencies involving:
- Monthly revenue
- Business name
- Business activity
- Existing obligations
- Time in business
- Deposit patterns
- Account ownership
If something doesn't line up, investigate it before submitting.
A clean application supported by consistent financial information creates a much stronger file.
Step 11: Evaluate the Overall Risk Picture
At this point, you should have a much clearer picture of the business.
Now put everything together.
Consider:
Revenue
Is it strong, stable, increasing, or declining?
Cash Flow
Is the business maintaining sufficient liquidity?
NSFs
Are they isolated or recurring?
Existing Positions
How many obligations appear to exist?
Payment Burden
How much cash flow is already committed?
Stacking
Are there indicators of multiple recent positions?
Trends
Is the business improving or deteriorating?
Documentation
Is the information complete and consistent?
This is where individual data points become a deal profile.
Step 12: Determine How the Deal Should Be Positioned
The purpose of underwriting isn't necessarily to find a reason not to fund.
It's about understanding what type of deal you're actually looking at.
A broker might discover that a merchant:
- Has strong revenue
- Has limited existing debt
- Maintains healthy balances
- Has minimal NSF activity
- Has consistent deposits
That may indicate a relatively straightforward opportunity.
Another merchant might have:
- Declining revenue
- Several existing positions
- High payment burden
- Frequent negative balances
- Increasing NSF activity
That requires a very different strategy.
The underwriting process helps you understand the difference.
Step 13: Make Human Judgment the Final Step
Technology can help analyze a deal.
It can identify patterns.
It can organize transactions.
It can surface potential risk.
But AI shouldn't replace human judgment.
A strong underwriting workflow combines:
Data + Technology + Experience + Human Judgment
AI can help you get to the important information faster.
The person reviewing the deal still needs to understand the context and make the appropriate decision.
How AI Can Make MCA Underwriting Faster
Manually reviewing several months of bank statements can be time-consuming.
That's where AI underwriting tools can help.
Instead of manually searching through every transaction, AI can help organize important information around:
- 📊 Revenue
- 💵 Cash flow
- 🚨 NSFs
- 🏦 Existing positions
- 📉 Revenue trends
- ⚠️ Risk signals
- 💰 Payment burden
The goal isn't to remove the underwriter.
It's to remove unnecessary manual work.
A Simple MCA Underwriting Checklist
Before submitting a deal, ask:
- ☐ Did I verify the bank statements?
- ☐ Did I calculate actual revenue?
- ☐ Did I examine revenue trends?
- ☐ Did I review cash flow?
- ☐ Did I check NSF activity?
- ☐ Did I look for negative balance days?
- ☐ Did I identify recurring financing payments?
- ☐ Did I investigate potential existing positions?
- ☐ Did I calculate payment burden?
- ☐ Did I look for stacking indicators?
- ☐ Did I investigate unusual deposits?
- ☐ Did I review transfers?
- ☐ Does the application match the statements?
- ☐ Is the documentation complete?
- ☐ Do I understand the overall risk profile?
If you can answer all of those questions, you're in a much better position to determine how the deal should move forward.
The Future of MCA Underwriting
MCA underwriting is becoming increasingly technology-driven.
But the fundamentals aren't changing.
- Understand the revenue.
- Understand the cash flow.
- Understand the obligations.
- Understand the risks.
- Understand the merchant.
The best technology doesn't replace that process.
It makes the process faster.
That's the opportunity with AI.
Try Free AI Underwriting With FundingBrother
FundingBrother.com is built specifically for the MCA ecosystem.
Upload bank statements and use AI to analyze:
- 🧠 Revenue
- 📊 Cash Flow
- 🚨 NSFs & Risk Flags
- 💰 Existing Positions
- 📈 Deal Health
- 🤖 AI Underwriting Copilot
Instead of spending hours digging through statements, get structured underwriting intelligence in seconds and then apply your own judgment.
Work smarter. Underwrite faster.
Try FundingBrother.com for free
Related Resources
Want to analyze an MCA deal?
Upload your bank statements and see what AI-powered deal intelligence can do with your next file.
No subscription. No credit card. Just upload a deal and see what comes back.
Explore FundingBrother.com