Merchant cash advance underwriting is unlike bank underwriting: funders care less about your credit score and tax returns and far more about what's flowing through your business bank account right now. That makes the requirements simpler — but the product is also one of the most expensive ways to borrow, so it pays to know exactly what funders check, what documents you'll need, and what the offer will really cost before you sign.
What a merchant cash advance is (and why requirements look different)
A Merchant Cash Advance (MCA) is not technically a loan. The CFPB describes it as an advance that the business repays plus a multiple of the amount advanced — for example a 1.2 or 1.5 factor rate — structured as a purchase of future revenue rather than a credit agreement (CFPB small business lending rule FAQs, current as of September 2026).
Repayment happens through a holdback — a percentage of daily card sales collected via your card processor — or, more commonly today, a fixed daily or weekly ACH debit from your business bank account. That repayment mechanic explains the entire requirements list: the funder needs to be confident your account can absorb an automatic debit every business day. So underwriting revolves around bank statement health, not projections or collateral appraisals.
The CFPB classifies MCAs as the primary form of sales-based financing, the same family as revenue-based financing. If your revenue is strong but you want repayment that flexes with sales rather than a rigid daily draft, compare both — our guide on MCA vs. revenue-based financing walks through the differences.
The core requirements funders check
Exact thresholds vary by funder — there is no industry rulebook — but underwriting consistently looks at the same eight factors. Treat the numbers below as typical ranges, not guarantees.
| Factor | Typical expectation | Why it matters |
|---|---|---|
| Monthly revenue | Often $10,000–$15,000+ in monthly bank deposits; more for larger advances | Advance size is usually capped at roughly 70–120% of one month's revenue |
| Deposit consistency | Regular deposits (often 5+ per month), not one lump sum | Steady inflows support a daily debit; lumpy revenue raises risk |
| Time in business | Commonly 6+ months; some funders want 12+ | Shows revenue is a trend, not a spike |
| Average daily balance | Positive cushion relative to the proposed daily payment | The account must absorb debits without going negative |
| Negative days | Often no more than ~3–5 per month, varying by funder | Negative days predict missed debits |
| NSFs | Few or none in the statement period | Non-Sufficient Funds (NSF) events are the strongest decline signal |
| Existing positions | Zero or one open advance preferred | Stacked advances compete for the same daily cash flow |
| Industry | Each funder maintains its own restricted list | High-chargeback, seasonal, or cash-heavy industries face tighter terms |
A few of these deserve a closer look.
Negative days and NSFs. Funders literally count the days your balance dipped below zero and the number of returned items in each statement. One bad month with an explanation (a large one-time expense, a slow-paying customer) is usually survivable. A pattern across multiple months typically means a decline or a much smaller offer at a higher factor rate.
Existing positions and stacking. If you already have an open advance, a new funder sees a competitor debiting your account first. Some will fund a second position at worse pricing; most decline third positions. Be aware that stacking — taking a new advance on top of an existing one — often violates your current MCA agreement. If you're stacked and struggling, read our guide on getting out of a merchant cash advance before adding another position.
Industry risk. Restricted-industry lists are proprietary and differ funder to funder. Businesses with heavy chargeback exposure, deep seasonality, or largely cash revenue (which doesn't show up in bank deposits) generally see smaller offers, shorter terms, or declines.
Credit. Personal credit matters less here than almost anywhere else in business financing, but it still matters. Funders assess credit and repayment ability, and approval and pricing vary by funder — expect at least a soft pull at application and possibly a hard pull before funding.
The document checklist
One reason MCAs fund fast is the thin document stack. Have these ready:
- Business bank statements — the last 3–4 months minimum; 6–12 months for larger advances
- Card processing statements — if repayment will come via a holdback on card sales (typically 3 months)
- Completed application — legal business name, EIN, entity type, start date, address, owner info
- Driver's license of each owner signing (usually 20%+ ownership)
- Voided business check or bank letter for the funding and debit account
- Proof of ownership — articles of incorporation, operating agreement, or business license, depending on entity type
- Bank verification — most funders now require a read-only bank login link or a month-to-date statement right before funding to confirm balances and check for new positions
- Occasionally: most recent business tax return or a current A/R or lease document for larger advances
Notice what's absent: no business plan, no multi-year financials, no collateral appraisal. That's the trade — speed and accessibility in exchange for cost.
What it actually costs: a worked example
MCA cost is quoted as a factor rate, not an interest rate. Multiply the advance by the factor rate to get total repayment:
- Advance: $50,000
- Factor rate: 1.35
- Total repayment: $50,000 × 1.35 = $67,500 (cost of $17,500)
- Term: repaid via fixed daily debits over roughly 8 months (~168 business days)
- Daily payment: $67,500 ÷ 168 ≈ $402 per business day
Here's the part that surprises people: $17,500 on $50,000 looks like "35%," but because you repay it in 8 months — and your balance declines the whole time — the effective APR is far higher, often well into the range of 60%–100%+ depending on term length. And the cost is fixed: repaying early generally does not reduce the total owed unless your contract includes an early-payoff discount. Also verify net funding — the FTC has alleged that some providers deducted upfront fees so the amount deposited didn't match the contract amount (FTC, 2020).
For the full conversion math, see factor rate vs. APR.
▦Estimate your revenue-based financing paymentsRun the numbers in the revenue-based financing estimator →▸Contract terms to scrutinize before signing
Because MCAs are structured as receivables purchases rather than loans, many loan-borrower protections don't apply. Review these five items in every agreement:
- Confession of judgment (COJ). The FTC has pursued MCA operators who required businesses and owners to sign confessions of judgment allowing immediate, uncontested judgments and asset seizure on an alleged default (FTC, 2023). Treat any COJ as a serious red flag.
- Personal guarantee. Marketing claims of "no personal guaranty" have been found false in FTC enforcement (FTC, 2022). Read what you're actually guaranteeing — usually performance of the receivables sale.
- UCC-1 filing. Most funders file a UCC Lien (UCC-1 Filing) against business assets, which can complicate future financing until released.
- Fees and net funding. Origination, ACH, and "underwriting" fees may be deducted before disbursement. Confirm the exact dollar amount hitting your account.
- Reconciliation clause. A true sales-based advance should let you request a payment adjustment if revenue drops. Fixed-debit contracts without reconciliation behave like very expensive short-term loans.
If you operate in California, New York, Utah, or Virginia, state commercial financing disclosure laws require providers to give you cost disclosures — the CFPB has confirmed these laws stand alongside federal law (CFPB determination). Use those disclosures to compare offers on equal footing.
Alternatives to price against before you sign
An MCA should be the option you choose after comparing, not the default. If your business meets MCA requirements, it may qualify for cheaper products too:
- Business line of credit — draw only what you need, pay interest only on the outstanding balance, reuse as you repay. See how big your line should be.
- Invoice factoring — if you invoice other businesses, sell receivables for immediate cash; cost is tied to invoices, not daily debits.
- Revenue-based financing — payments flex with actual revenue, easing pressure in slow months.
- Term loans — longer terms and lower total cost for borrowers with stronger profiles.
- SBA options — SBA microloans go up to $50,000 with rates generally between 8% and 13% and terms up to seven years (SBA, March 2026), and 7(a) loans reach $5 million. They take longer, but the cost difference against a 1.35 factor rate is enormous.
How to apply through a marketplace
Because every funder sets its own thresholds — one declines you at four negative days, another funds you at five — shopping matters more with MCAs than with almost any other product. EQ Funding is a financing marketplace, not a lender: one application reaches a network of lenders and funders who compete for your business, so you can compare factor rates, terms, net funding amounts, and contract terms side by side instead of taking the first offer. Every funder makes its own credit and approval decisions, and terms vary — but competition is the most reliable way to avoid overpaying for speed.