Merchant Cash Advance Requirements: How Funders Analyze Your Application

Merchant cash advance requirements follow a qualification checklist. They are not subjective, and they are not based on guesswork.

When a business owner is approved by one MCA provider but declined by another, the difference almost always comes down to how the bank statements and cash flow were analyzed. Underwriters evaluate revenue consistency, liquidity, existing debt obligations, and industry risk to determine whether a business can support frequent repayments.

This guide explains merchant cash advance requirements from an underwriting perspective, focusing on how lenders analyze bank statements, calculate cash flow ratios, assess MCA stacking risk, and assign internal risk tiers. The goal is to help business owners understand how eligibility is determined before applying for funding.

For a full overview of how merchant cash advances work, repayment structures, how to choose a funding company, see our main guide on merchant cash advance.

Key Highlights

Merchant cash advance requirements focus on cash flow behavior, not just credit score
Funders review 3–6 months of business bank statements to assess repayment capacity
Average daily balances should generally equal at least 5% of monthly revenue
Excessive overdrafts, NSFs, or multiple “stacked” MCAs increase underwriting risk
Understanding funder criteria improves approval odds and pricing outcomes

What Are the Requirements for a Merchant Cash Advance?

Most MCA providers use a standardized qualification framework. While requirements vary slightly by lender, the underwriting checklist below reflects common approval criteria across the industry.

Business and Personal Credit Considerations

Credit score alone is not a primary approval driver for a merchant cash advance. Many MCA approvals are issued to business owners with bad or challenged credit, as long as the business demonstrates strong, consistent cash flow through bank statements and revenue trends.

That said, certain credit-related issues can trigger automatic declines regardless of cash flow strength. Open bankruptcies, unresolved judgments, and active tax or UCC liens raise collection and enforcement risks for funders. This is especially true if the credit file shows prior merchant cash advance defaults, which signal elevated repayment risk and are heavily weighted in underwriting decisions.

Business Bank Statements (3–6 Months)

Bank statements are the most important document in MCA underwriting.

Underwriters analyze:

True deposits (actual operating revenue, not transfers or loan proceeds)
Deposit frequency and consistency
Average daily balance
Overdrafts, NSFs, and returned items

These data points show whether the business can support daily or weekly remittances without cash flow strain.

💡 Pro Tip: Not all business bank statements qualify for a merchant cash advance. Many online banks restrict ACH debits, which is why some funders won’t accept statements from fintech platforms. For the best approval odds, use a credit union, regional bank, or national banks like Chase or Wells Fargo before applying.

Merchant Processing Statements (If Applicable)

For businesses that accept credit or debit cards, lenders may request merchant processing statements. These statements show batch volume, refund rates, and transaction consistency and are especially relevant for split-funded MCA structures.

Time in Business and Revenue Thresholds

Typical minimum benchmarks include:

6–12 months in business
$10,000–$20,000+ in monthly gross deposits

These thresholds help confirm operational stability.

Industry Eligibility

Each merchant cash advance provider maintains its own list of eligible and restricted industries based on risk, regulation, and volatility, which can directly affect approval odds, pricing, and available funding structures. While many funders avoid niche or regulated sectors altogether, AMP Advance can fund a wide range of industries that most providers won’t—learn more about Who We Fund.What Are the Requirements for a Merchant Cash Advance?

How Underwriters Analyze Bank Statements for Eligibility

Underwriters do not simply total deposits. They analyze patterns, volatility, and liquidity trends to assess repayment risk.

Key metrics include:

True deposits: Operating revenue only; transfers and loan wires are excluded
Average daily balance: Indicates available cash cushion
Deposit frequency: Shows sales velocity and revenue consistency
Overdrafts and NSFs: Signal liquidity stress
Returned items: Suggest instability or disputes

As a general guideline, providers prefer average daily balances that equal at least 5% of monthly gross deposits. For example, if your true revenues are $50,000 per month you should keep $5,000 per day in ending daily balance.

Holdback Percentage Explained

One of the most important underwriting criteria in a merchant cash advance is the holdback (HB) percentage. The holdback is the agreed-upon percentage of a business’s revenue that is purchased by the funder and remitted toward repayment under the MCA agreement.

Example:
A 15% holdback means the funder receives 15% of the business’s gross revenue during each remittance period (daily or monthly, depending on the structure). If a business generates $10,000 in monthly revenue with a 15% holdback, the total debt service would be $1,500 per month, or approximately $71 per business day ($1,500 / 21 business days a month).

Funding companies are highly sensitive to holdback levels because they determine how much of a business’s revenue is already committed to repayment. When multiple MCAs are stacked, the combined holdback percentage can quickly become excessive, significantly increasing underwriting risk and often resulting in a decline from new funding providers.

Risk Guidelines (Holdback as % of Revenue):

< 12% holdback → Lower underwriting risk
12%–24% holdback → Moderate risk
> 24% holdback → High risk

In general, a lower holdback is viewed as lower risk because the business retains a larger portion of its revenue, improving cash flow stability and the ability to support the receivables purchased.

Merchant Cash Advance Underwriting Checklist

Underwriting Factor	Preferred Benchmark	Why It Matters to Funders
Business Bank Statements	3–6 months	Confirms cash flow patterns and ability to collect on the account
True Monthly Revenue	$10,000+ per month	Verifies actual business income (excludes transfers or loans)
Average Daily Balance	≥ 5% of monthly revenue	Indicates liquidity cushion for remittances
Deposit Frequency	5+ per month	Shows active sales and revenue consistency
Negative Days	0–2 per month	Business days ending negative signal tight liquidity
NSFs / Returned Items	0–5 in 90 days	Frequent NSFs signal cash flow stress and repayment risk
Holdback Percentage (HB)	< 12% preferred	Lower holdbacks reduce cash flow strain
Active MCAs	0–1 preferred (2 max)	Limits stacking and excessive revenue encumbrance
Business & Personal Credit	Bad credit acceptable; no open BKs, liens, or MCA defaults	Legal or default-related credit issues can trigger automatic declines
Industry Eligibility	Must meet lender criteria	Risk varies by regulation and volatility

Merchant Cash Advance Application Process (4 Steps)

Step 1: Submit an Application
Provide basic business details, ownership information, industry type, and estimated monthly revenue. This initial screen checks industry eligibility and baseline requirements from the qualification checklist.
Step 2: Upload Financial Documents
Lenders review 3–6 months of business bank statements (and merchant processing statements if applicable) to assess true deposits, average daily balance, negative days, NSFs, holdback capacity, and active MCAs—this is the most critical underwriting step.
Step 3: Receive a Conditional Offer
If the file meets checklist benchmarks, the funder issues an offer outlining the advance amount, total receivable, holdback percentage, and repayment method. Terms reflect risk factors identified in the underwriting grid.
Step 4: Final Approval and Funding
After acceptance and final verification, documents are executed and funding is typically released within 48hrs depending on bank setup and repayment structure.

What Delays Funding

Incomplete or inconsistent bank statements (missing pages, mixed transfers)
Excessive negative days, NSFs, or returned items
High holdback percentages or stacked MCAs beyond checklist limits
ACH restrictions with certain online banks
Industry misalignment or unresolved credit issues (open BKs, liens, prior MCA defaults)

Merchant Cash Advance Requirements F.A.Q.

What are the main merchant cash advance requirements?

Merchant cash advance requirements focus primarily on cash flow. Lenders typically review 3–6 months of business bank statements, consistent monthly revenue, average daily balances, NSF activity, holdback levels, existing MCAs, and industry eligibility.

Can I qualify for a merchant cash advance with bad credit?

Yes. Bad personal or business credit is often acceptable if the business shows strong, consistent cash flow. However, open bankruptcies, unresolved judgments or liens, and prior merchant cash advance defaults can lead to automatic declines.

How do bank statements affect MCA approval?

Funders use bank statements to analyze true deposits, negative days, overdrafts, NSF events, and whether the business can support daily or weekly remittances without cash flow strain.

As well, all banks are not created equal, Fintech banks often conflict with ACH debits with Merchant Cash Advances, many funders will automatically declines these accounts. Rule of thumb is stick to brick and mortar banks.

What causes merchant cash advance applications to be delayed or declined?

Common issues include incomplete bank statements, frequent negative days or NSFs, excessive MCA stacking, high holdback percentages, ACH restrictions with certain banks, and operating in a restricted industry.

Final Thoughts: Qualify Before You Apply

Merchant cash advance approvals aren’t random — they’re the result of how well your cash flow holds up under underwriting review. When you understand how lenders analyze bank statements, evaluate negative days, assess holdback percentages, and review credit and stacking risk, you can address issues before they turn into declines.

MCAs are built for businesses that are actively generating revenue and need fast access to capital, not perfect credit. By keeping your bank accounts clean, maintaining manageable repayment levels, and aligning with eligible industries, you put yourself in position to qualify on better terms when the opportunity arises.