MCA Underwriting
MCA underwriting is the credit-decisioning process where funders evaluate merchant applications — analyzing bank statements, processing volume, time in business, industry, and existing position count — to determine approval, advance amount, factor rate, and term.
Why This Matters
MCA underwriting fundamentally differs from bank lending. Cash flow signals dominate: monthly revenue trends, average daily balance, NSF and overdraft frequency, and ACH activity revealing existing positions. Credit score plays a secondary role — most MCA funders accept FICO 540+ if cash flow is strong. Time-to-decision is competitive: top funders approve clean files in 4-24 hours. The underwriting model produces three outputs: approval/decline, approved amount (typically 50-150% of monthly revenue), and pricing tier (factor rate and term combination based on risk score).
Example
Application: $80K monthly revenue restaurant, 18 months in business, 540 FICO, no UCC liens visible. Underwriter pulls 4 months of statements: average revenue $78K confirmed, 2 NSFs in 4 months, ADB $12K, no other ACH funder withdrawals visible. Decision: approve $50K at 1.35 factor, 6-month term, 18% holdback.
Frequently Asked Questions
Frequently Asked Questions
What's the typical MCA approval rate?
30-50% of complete applications across the industry. Higher-quality applicant pools (pre-qualified inbound, direct funder sourcing) reach 50-70% approval. Aggregator-sourced shared leads run 20-35% approval as the same applicant is shopped to multiple funders simultaneously.
How long does MCA underwriting take?
Standard files: 4-24 hours from complete submission to approval. Complex deals (large amounts, second-position, non-standard structures): 1-3 business days. Top funders compete on speed — same-day approvals are common for clean small deals, multi-day reviews for larger or higher-risk submissions.