MCA Underwriting Checklist: What to Review Before Funding

Why MCA Underwriting Requires a Structured Checklist

Merchant cash advance underwriting is fast by design — deals often need to fund within 24–48 hours. That speed creates risk if your review process isn't systematic. A structured checklist ensures nothing critical gets missed in the rush, and it provides documentation that supports consistent, defensible funding decisions.

This checklist covers the key areas every MCA underwriter should review before approving an advance.

Section 1: Business Verification

Before looking at any financial data, confirm the business is legitimate and meets basic eligibility:

☐ Business has been operating for minimum required period (typically 6–12 months)
☐ Business type is eligible (no restricted industries — cannabis, firearms, gambling, non-profits in some programs)
☐ Valid business license or registration confirmed
☐ Business address verified (not a PO box or virtual address without verification)
☐ Owner identity verified — government-issued ID matches application
☐ Personal guarantee confirmed from all owners with 20%+ equity

Section 2: Bank Statement Review

Bank statements are the core of MCA underwriting. AI tools like StatementScrub can process this review in under 30 seconds, but here's what to confirm:

☐ Minimum 3 months of bank statements provided (6 preferred)
☐ Average monthly deposits meet minimum threshold (typically $10,000–$15,000+)
☐ Deposit volume is consistent — not one large deposit inflating the average
☐ Ending balances are positive — negative ending balances in any month are a red flag
☐ Average daily balance is above minimum (typically $1,000+)
☐ NSF/overdraft count is within acceptable range (most programs: 0–5 per month max)
☐ No negative days (days where account balance went negative)
☐ Existing MCA repayments identified and accounted for in available cash flow
☐ MCA stacking check — how many simultaneous advances are being repaid?
☐ No suspicious circular deposit patterns
☐ Cash deposits reviewed — excessive cash deposits may indicate unreported income or money laundering risk
☐ Gambling transactions noted (frequency and dollar amount)
☐ Deposit trend is stable or increasing, not declining over the period

Section 3: Existing MCA Stacking Assessment

MCA stacking is the single highest risk factor in merchant cash advance underwriting. A business with multiple simultaneous advances is statistically much more likely to default. Check:

☐ Count of active MCA repayments in bank statements
☐ Estimated total daily MCA payment (sum of all identified debits)
☐ Daily MCA burden as a percentage of average daily deposits (ideal: under 15–20%)
☐ LexisNexis or similar data pull for lien/UCC filing history
☐ UCC-1 filings searched — how many active liens on business?
☐ Time since last advance funded (recent stacking attempt?)

Section 4: Credit Review

MCA underwriting relies primarily on cash flow, but credit still matters:

☐ Owner FICO score meets minimum (typically 500–550 for most programs; some go lower)
☐ No open bankruptcies
☐ No recent Chapter 7 (most programs: must be discharged 1–2 years ago)
☐ Chapter 13 — check program guidelines
☐ Outstanding tax liens reviewed — federal tax liens are typically disqualifying
☐ Judgments reviewed — significant outstanding judgments noted
☐ No active garnishments on business bank account

Section 5: Revenue and Business Health

☐ Business revenue matches deposit volume (no major discrepancy)
☐ Industry revenue trends reviewed (is the sector growing, stable, or declining?)
☐ Seasonal business identified and accounted for in repayment factor
☐ Processing statements reviewed if available (credit card volume confirms revenue)
☐ Business is not showing signs of wind-down (rapidly declining deposits, closing sales, etc.)

Section 6: Deal Structure Review

Before final approval, confirm the deal makes financial sense:

☐ Factor rate appropriate to risk tier
☐ Advance amount does not exceed 100–150% of average monthly deposits
☐ Daily or weekly payment amount is sustainable relative to average daily deposits
☐ Term length reasonable given business cash flow
☐ Total MCA exposure (this deal + existing) does not exceed program limits
☐ Use of funds confirmed and appropriate

Section 7: Documentation Completeness

☐ Signed merchant application received
☐ Voided check or bank letter for ACH authorization
☐ Government-issued ID (all guarantors)
☐ Business verification documents
☐ Bank statements (minimum required months)
☐ Signed merchant agreement / contract
☐ ISO or broker agreement on file if applicable

Using This Checklist with AI Bank Statement Analysis

The bank statement section of this checklist — which is the most time-consuming part of manual MCA underwriting — can be automated. StatementScrub processes any bank statement PDF in under 30 seconds and returns average monthly deposits, NSF count, MCA repayment detection, average daily balance, and a risk score. This replaces 20–30 minutes of manual review with a structured output you can act on immediately.

Many MCA originators use StatementScrub as their first-pass screening tool — running statements on every applicant before doing deeper due diligence on the ones that pass initial review.

Bottom Line

Consistent underwriting requires a consistent process. Using a checklist like this one — combined with automated bank statement analysis — reduces missed signals, speeds up decisioning, and creates a documented review trail for every deal you fund.