Default Risk Scoring
Default risk scoring is the algorithmic assessment of a merchant's probability of defaulting on a cash advance — combining bank statement signals, prior position count, industry default rates, business age, geography, and revenue trend into a quantitative risk score.
Why This Matters
Default scoring drives both go/no-go decisions and pricing tiers in modern MCA underwriting. Inputs typically include: monthly revenue trend, NSF frequency, average daily balance, time in business, industry sector default rate, geographic market default rate, current position count, and (where available) credit signals. Outputs feed pricing models — higher risk drives higher factor rates and shorter terms, or outright declines. Top MCA funders maintain proprietary default models updated continuously with portfolio performance data, creating sustained pricing and approval-rate advantages over less-data-driven competitors.
Frequently Asked Questions
Frequently Asked Questions
What's the average MCA portfolio default rate?
Industry-typical default rates run 8-15% by deal count and 4-10% by dollar volume. Higher-quality portfolios (first-position, larger deals, lower-risk industries) run 5-8%. Lower-tier portfolios (third-position, restaurant-heavy, high-stress geographies) can hit 20-30%.
How does default risk scoring affect lead prioritization?
Top shops route highest-default-risk leads away from senior closers (waste of expensive rep time) toward specialty programs willing to fund at higher pricing. Low-default-risk leads get fast-track to senior closers offering competitive first-position rates.