Ending Balance Analysis
Ending balance analysis is the underwriting practice of examining the merchant's end-of-day or end-of-month bank account balances over the trailing 3-6 months — assessing cash management discipline, capital reserves, and ability to absorb MCA repayment obligations without operational disruption.
Why This Matters
Ending balance patterns reveal merchant financial sophistication. Strong ending balances ($10K+ consistently maintained) indicate cash management discipline and reserves to absorb business volatility. Low ending balances ($500-$2,000 typical) signal cash-flow tightness that elevates MCA default risk because the merchant has minimal buffer against revenue dips during the advance term. Some funders calculate weighted ending balance metrics — applying greater weight to recent months and to month-end balances — to emphasize the most predictive patterns.
Frequently Asked Questions
Frequently Asked Questions
What ending balance threshold matters for MCA underwriting?
Above $5,000 average ending balance is generally acceptable; below $1,000 average raises concerns. The relevant threshold scales with advance size — larger advances require demonstrating proportionally larger reserve capacity to handle payment obligations.
Can a merchant with low ending balances still get MCA?
Yes through specialty programs at higher factor rates (1.40+) and tighter holdback structures, but mainstream programs typically decline. Specialty high-risk MCA exists specifically for cash-flow-tight merchants but at premium pricing reflecting elevated default risk.