MCA Underwriting: Requirements, Review Steps and Red Flags

MCA underwriting evaluates whether a proposed advance fits a business's sales activity, cash flow, and existing obligations. A complete application helps the team review the facts; it does not guarantee an approval. For ISOs, the most useful preparation is an accurate file with a clear explanation of the merchant's funding need.

Logic Advance Starting Requirements

Our published screening guidelines start with at least six months in business, $25,000 in monthly revenue, and a 500+ credit score for MCA review. These are starting criteria rather than an offer. Product-specific requirements, business location, industry, existing financing, and other underwriting findings can affect eligibility.

Prepare the four most recent complete business bank statements and a signed application. Have a valid government-issued ID and business account verification available when requested. Check the current broker submission guidelines before submitting; underwriting can request additional documents.

What Underwriters Review

Revenue and Cash Flow

Review both the level and pattern of deposits. A monthly average alone can hide a weak recent month, seasonal concentration, or frequent low balances. Identify transfers between accounts, prior financing deposits, and unusual credits so they are not mistaken for recurring customer revenue. The underwriting team determines how revenue is verified.

For illustration, four months of business revenue totaling $120,000 averages $30,000 per month. That average exceeds the stated $25,000 starting threshold, but it says nothing by itself about available cash after payroll, rent, taxes, existing financing, and other expenses.

Operating History and Business Identity

The application should consistently identify the legal entity, business name, owners, location, and operating history. Explain a recent name change, bank-account change, or ownership transition rather than leaving the reviewer to reconcile conflicting records.

Credit and Existing Obligations

Credit is one part of the review. A score at or above the minimum does not override other concerns. List current advances, loans, payment schedules, balances, and any other obligations requested. A proposed additional position must be reviewed in the context of the business's overall payment burden.

Industry, Seasonality and Use of Funds

Describe what the business sells, when it collects revenue, and how the proposed funds will be used. If sales are seasonal, provide context and supporting records. Avoid presenting future contracts or projections as already collected revenue.

Daily Balances, Card Sales and Chargebacks

Ending daily balances show how much cash remains between deposits and expenses. Frequent near-zero or negative days can prompt additional questions even when monthly revenue looks sufficient. Where card sales matter to the file, processing statements can help explain deposits, refunds, and disputed transactions. Chargebacks can reduce expected receipts; provide context for unusual patterns.

Ratios and Paper Grades Are Provider-Specific

A payment-to-revenue calculation compares obligations with business revenue for the same period. For example, $6,000 in monthly payments divided by $30,000 in monthly revenue is 20%. That is an illustrative calculation, not an approval threshold or a substitute for reviewing operating expenses. Ask which income measure a provider means if it uses the label debt-to-income.

A debt-to-asset ratio compares debt with assets, but the definitions and relevance depend on the review. Do not substitute equipment value for available operating cash. Some providers label risk tiers A, B, C, or D; these labels are not a universal MCA standard, and Logic Advance does not publish a grade table here. Avoid assigning a merchant a grade based on another funder's thresholds.

The Review Process, Step by Step

1. Intake: Confirm the application, authorization, and required statements are complete.
2. Verification: Review business identity, account information, revenue, and existing financing.
3. Underwriting: Assess risk and determine whether an offer can be made.
4. Offer review: Explain net proceeds, total remittance, costs, payment arrangements, and conditions.
5. Closing: Complete requested verification and documents. Funding depends on final approval and processing.

Common Red Flags and How to Address Them

• Declining deposits: Explain the cause with supporting facts; do not omit the weaker month.
• Frequent overdrafts or NSFs: Identify the pattern and discuss it honestly. There is no universal acceptable count.
• Undisclosed financing: Supply accurate balances and payment details. Never remove transactions from statements.
• Missing or inconsistent records: Request complete, readable originals and resolve mismatched business details.
• Bankruptcy, liens, or legal issues: Disclose requested information and ask the team whether the file is eligible for review.

Explain the Offer Before the Merchant Signs

A factor rate is not an annual percentage rate. An illustrative $50,000 advance at a 1.30 factor produces $65,000 in contracted remittance before other fees or adjustments. Actual net proceeds, timing, payment structure, and required cost disclosures determine how to compare an offer. This example is not a Logic Advance quote.

Confirm whether collection uses a sales split or scheduled debits, how any reconciliation procedure works, and whether the agreement includes liens or guarantees. Do not promise that scheduled debits automatically decline with sales. The FTC's guidance for small-business financing providers emphasizes accurate representations of funding amounts and security obligations.

Write a Useful Deal Note

Summarize the business, requested amount, intended use, operating history, revenue pattern, existing obligations, and any issue the reviewer should understand. Keep the note factual and brief. Submit supporting financial documents through the approved channel rather than putting sensitive details into general contact messages.

Explore merchant cash advance information or ask our team about a submission.