Merchant Cash Advances (MCAs) have become one of the fastest, easiest forms of financing available to business owners today. Funds can be approved and deposited in as little as 24 hours, even for businesses that have been turned down by banks or have inconsistent
financial history.
But the speed of MCA approval should not be mistaken for simplicity.
Behind the scenes, MCA funders use a unique evaluation process that looks very different from traditional underwriting. And while the process is quick, it often leaves business owners with a false sense of comfort — unaware of the risks hidden in the fine print or the assumptions the funder is making about their revenue, operations, and stability.
In nearly all of our case studies — including construction, medical, print shop, and subscription businesses — the owners were approved quickly, without fully realizing how their actual operations could conflict with MCA repayment expectations later. These mismatches ultimately contributed to the financial strain they experienced.
This blog pulls back the curtain on how MCA companies evaluate your business, what metrics they prioritize, what they overlook, and why these blind spots can cause problems down the road.
Section 1 — MCA Underwriting Is Fast Because It’s Focused on One Thing: Revenue
Banks evaluate:
- Collateral
- Credit
- Profitability
- Debt-to-income ratios
- Long-term financial projections
MCAs evaluate almost none of this.
Instead, MCA approval is driven by a single core idea:
⭐ Past revenue predicts future revenue.
That’s the assumption.
Because MCAs purchase future receivables, funders believe:
- If a business deposited $50,000 per month for the past 90 days…
- It will continue depositing $50,000 per month.
This forms the foundation of MCA underwriting — and the root cause of many issues later.
Section 2 — The Core Metrics MCA Funders Look At
Let’s break MCA underwriting into simple, clear components.
-
Average Daily Bank Balance
Funders want to see:
– Positive cash flow
– Consistent deposits
– Limited overdraft activity
Even businesses with lower revenue can qualify if their balances appear stable. - Monthly Revenue Over the Previous 3–6 Months
This is the funder’s primary decision factor.
They assess:
– Total deposits
– Deposit frequency
– Seasonal patterns
– Large or unusual transactions
What they don’t always consider is:
- Why revenue fluctuates
- Whether the business is experiencing temporary disruptions
- Whether costs have risen
- Whether receivables are delayed
- Whether future cash flow is predictable
This was especially relevant in the Medical Center Case Study, where billing errors caused temporary AR issues that funders misinterpreted as stable revenue.
- Revenue Trends (Increasing or Decreasing)
Funders love upward trends — even if they come from short-term conditions.
They get nervous when:
– Revenue decreases
– Seasonality is present
– Large customers delay payment
But rather than decline funding, many MCA companies compensate by:
– Increasing factor rates
– Reducing advance sizes
– Shortening repayment terms
This limits the funder’s risk — not the business’s. - Number of Existing Loans or Advances
Many funders approve clients who already have multiple MCAs.
This is where stacking begins.
In the Construction Company Case Study, funders allowed multiple MCAs on top of existing advances, despite clear evidence that repayment obligations were becoming excessive. - Daily Balance Stability
MCA companies favor businesses with:
- Regular daily deposits
- Predictable revenue patterns
Businesses that rely on:
- Weekly deposits
- Monthly invoices
- Seasonal cycles
- Large project-based revenue
…can appear “stable,” even if cash flow is inconsistent.
The Print Shop Case Study is a perfect example: revenue looked consistent on paper, but equipment delays and supply chain issues created unpredictable daily liquidity.
Funders rarely consider these realities.
- Credit Score (Minimal Importance)
Credit is not a major factor — many MCA borrowers have imperfect credit.
Funders consider credit history only for:
– Fraud risk
– Bankruptcy history
– Judgment risk
– UCC conflicts
It is not used to assess affordability, which is why many owners qualify for MCAs they realistically cannot sustain. - Industry Type and Perceived Risk
Some industries receive more scrutiny:
– Restaurants
– Construction
– Retail
– Transportation
– Subscription businesses
– Medical practices with Medicare/Medicaid billing
Why?
Because revenue is often:
– Seasonal
– Delayed
– Volatile
– Insurance-dependent
– Equipment-dependent
But instead of declining these applications, funders usually increase pricing — shifting risk to the business.
Section 3 — What MCA Funders Rarely Consider (But Should)
This section is critical.
The MCA model assumes revenue stability — but real businesses experience complex, dynamic challenges that MCA underwriting rarely predicts or understands.
Funders generally do not account for:
✔ Rising costs
✔ Labor shortages
✔ Supply chain issues
✔ Equipment breakdowns
✔ Client payment delays
✔ AR errors (as seen in the Medical Center Case Study)
✔ Seasonality
✔ Unexpected emergencies
✔ Legal or insurance disputes
✔ Vendor shortages
✔ Regulatory changes
These issues dramatically affect cash flow — but MCA payments stay the same unless reconciliation occurs.
This contributes to why businesses feel blindsided after taking an MCA, even when their top-line revenue seems healthy.
Section 4 — The Problem With MCA Underwriting: It Assumes No Changes in Your Business
MCAs are approved based on the belief that the next 6–12 months will look exactly like the last 3–6 months.
But this assumption is rarely true in real life.
Real businesses experience:
- Peaks
- Troughs
- Growth phases
- Disruptions
- Unexpected expenses
- Delayed receivables
- Equipment failures
- Staffing changes
- Market shifts
MCA underwriting often ignores these realities, which leads to a key point:
⭐ The MCA approval process does not evaluate affordability — it evaluates collectability.
That distinction is crucial.
MCAs are designed to maximize the funder’s confidence that they can collect payments quickly — not to ensure the business can sustain payments comfortably.
Section 5 — The Hidden Role of Risk-Sharing (And Why It Matters)
The only thing protecting businesses from the flaws of MCA underwriting is reconciliation, the process that adjusts payments downward when revenue or receivable flow declines.
A true MCA must:
- Rise when revenue rises
- Fall when revenue falls
- Share risk with the business owner
- Adjust to real-world conditions
- Reflect the business’s performance
This separates MCAs from loans.
But many funders:
- Make reconciliation difficult
- Delay processing
- Ignore hardship documentation
- Enforce fixed payments regardless of conditions
Which means:
❌ They are not actually sharing risk
❌ They are operating loan-like structures
❌ They are shifting all burden onto the business
Your case studies illustrate this clearly:
- The Print Shop had equipment failures — payments should have adjusted.
- The Medical Center had AR disruptions — payments should have adjusted.
- The Construction Company had delayed receivables — payments should have adjusted.
- The Subscription Business had seasonal downturns — payments should have adjusted.
The failure to honor reconciliation is often the root cause of MCA distress.
Section 6 — The Result: Businesses Feel Misled or Overextended
Because underwriting is based on:
- Recent deposits
- Not actual operating conditions
- Not future risk
- Not cost changes
- Not seasonality
- Not business complexity
Business owners often qualify for advances that look affordable on paper but become overwhelming in practice.
Common outcomes include:
- Tightened cash flow
- Vendor tensions
- Payroll strain
- Stacking additional MCAs
- Processor pressure
- Emotional burnout
- Legal concerns
- Operational slowdowns
In all four of your case studies, the MCA approval process did not anticipate the business’s real-life financial pattern — and this mismatch contributed to escalating pressure.
Section 7 — Why MCA Funders Approve Borrowers Quickly (Even When It’s Risky)
MCAs structure their economics around:
- High factor rates
- Fast repayment
- Short turnaround times
- Portfolio diversification
- Risk pricing
Funders expect some businesses to default — but still make a profit across the broader portfolio.
This model incentivizes:
✔ Fast decisions
✔ Minimal underwriting
✔ High pricing
✔ Quick repayment schedules
It does not incentivize understanding:
- Long-term business health
- Operational constraints
- Financial nuance
- Seasonal patterns
- Industry-specific volatility
This is why MCAs should be used extremely cautiously and with full understanding of how they work.
Section 8 — How Professional Advisors Protect Businesses During MCA Stress
When businesses experience strain, professional intervention becomes essential.
Experts help by:
✔ Reconstructing cash flow to determine true affordability
✔ Identifying where underwriting failed to account for real risks
✔ Preparing hardship documentation
✔ Presenting reconciled payment expectations clearly
✔ Communicating with funders strategically
✔ Aligning expectations across multiple MCA companies
✔ Reducing escalation risk
✔ Improving business stability
This is exactly what happened in:
- Construction Company Case Study — multiple MCAs were restructured after modeling showed true affordability
- Medical Center Case Study — AR corrections and payment adjustments stabilized cash flow
- Sports Subscription Case Study — seasonal patterns were clarified to funders
- Print Shop Case Study — operational setbacks were contextualized, enabling modified terms
Professional intervention bridges the gap between MCA underwriting assumptions and business reality.
Section 9 — What Business Owners Should Learn From the MCA Approval Process
Here are the key takeaways:
- MCA approval does not mean MCA affordability
The funder may approve you quickly — but that does not mean payments will be
comfortable long-term. - Underwriting rarely considers operational reality
It does not factor in:
– supply chain
– labor
– seasonality
– receivables cycles
– disruptions
– equipment issues
– rising costs
- Reconciliation exists for a reason — risk-sharing
If the funder is not adjusting payments when conditions change, they are not acting in the spirit of a true MCA. - Misunderstanding MCA structure can lead to stacking
Many businesses take on multiple MCAs because the first one tightened cash flow more than expected. - You are not alone — and your situation is solvable
Your case studies demonstrate that even serious MCA pressure can be corrected with the right support.
Conclusion — Understanding How MCA Funders Think Helps You Protect Your Business
MCA companies approve based on revenue, not reality.
Their underwriting is fast — but often incomplete.
They assume stability — but real businesses rarely operate in stable environments.
This does not make MCAs inherently bad.
It makes them tools that must be used with clarity, caution, and a full understanding of risk.
When problems arise — and for many businesses they do — professional support becomes critical. Experts help translate your real financial picture into terms MCA funders understand, negotiate sustainable payments, and restore operational breathing room.
Your business is not defined by an MCA.
And with the right guidance, you can regain control.