How We Underwrite MCA Deals: Inside Our Due Diligence Process

Here's a document most merchants never see.

It's called a Landlord Verification Form. Before we funded certain advances, we contacted the merchant's landlord directly. We wanted to confirm: Is this business actually operating from this address? Is the lease current? What's the rent payment history? Does the physical location match the revenue story the merchant is telling us?

This isn't unusual in commercial lending. It should be standard in MCA. But the uncomfortable truth is that most MCA brokers — the ones funding deals in 24 hours with a single bank statement and a pulse — don't do this. And their default rates show it.

After 15 years in this industry, I can tell you that the difference between a 3% default rate and a 15% default rate comes down to one thing: the quality of the underwriting that happened before the money moved.

Let me walk you through the actual process we use to evaluate deals.

What We Verify (And Why Most of It Is Non-Negotiable)

Every advance that comes through our desk goes through a multi-layer verification process. I'm going to lay it out exactly, because I think business owners deserve to know what a rigorous evaluation looks like — and what questions to ask their funder if they're not getting this level of service.

1. Bank Statement Analysis (Minimum 6 Months)

This is the backbone of MCA underwriting, and it's where most low-quality operators cut corners.

We require a minimum of 6 months of business bank statements. Not 3. Not 4. Six full months. Here's why:

A 3-month snapshot can hide a lot. Seasonal businesses — landscaping companies, holiday retailers, tax preparation services — can show 3 months of incredible revenue that completely misrepresents their annual cash flow. Six months captures the dips and the recoveries.

But we don't just calculate an average and call it a day. We:

Trace every ACH debit to identify existing MCA positions, loan payments, and regular obligations
Flag NSF and overdraft patterns — occasional NSFs happen; weekly NSFs signal a cash flow crisis
Calculate daily average revenue weighted toward recent months (a business trending up gets scored differently than one trending down)
Identify normalized cash flow by stripping out one-time deposits, transfers between accounts, and personal transactions

The goal isn't to catch you in a lie. It's to make sure the daily repayment amount we set doesn't strangle your business on a slow week.

2. Landlord / Lease Verification

Remember that form I mentioned? Here's what we're confirming:

Business address matches the physical location we're underwriting against
Lease is current and in good standing — if you're 3 months behind on rent, that's a red flag about broader cash flow
Rent payment history reflects consistent ability to meet fixed obligations
Premises suitability — a warehouse masquerading as a restaurant explained a lot of questionable revenue claims

This step alone has prevented more bad deals than any credit check. Physical verification catches things that paperwork can't.

3. Site Visit or Visual Verification

For larger advances, we verify the business is physically operational. This isn't always an in-person visit — sometimes it's a combination of Google Street View, a phone call, and a photo walkthrough. But for advances above specific thresholds, someone sees the operation.

What are we looking for?

Signage and branding consistent with the business type
Physical inventory and equipment
Customer traffic (even casual observation)
Location class and surrounding businesses — a strip mall restaurant faces different risks than a downtown flagship

4. Credit Report (Context, Not a Disqualifier)

We pull a business and personal credit report. But here's where MCA underwriting differs from bank underwriting: a low credit score does not automatically disqualify you.

Our target range starts at 500. Yes, credit matters in our risk scoring. But a restaurant owner with a 530 credit score and consistent $40K/month deposits is a fundamentally different risk than the same credit score with $8K/month deposits and declining revenue.

We look at:

Recent credit behavior more than the absolute score
Existing business debt and payment history
Tax liens and judgments that could affect repayment priority
Bankruptcy history — we don't auto-reject, but we need to understand the timeline and context

5. Industry and Market Risk Assessment

Some industries carry inherently higher default risk in certain economic environments. We maintain a live risk matrix that adjusts based on current market data.

Right now, our underwriting flags these sectors for elevated scrutiny:

Restaurants and food service — margin compression from food inflation, labor costs, and rising delivery platform fees
Transportation/trucking — fuel price volatility and freight rate inconsistency
Retail (brick-and-mortar) — consumer spending shifts, lease risk, competition from ecommerce
Construction — project timing risk, weather dependency, and receivables cycles

Industries currently showing lower default risk:

Healthcare practices — demographic tailwires, insurance demand
Business services — recurring revenue models
Ecommerce — lower overhead, scalable operations

Does this mean we don't fund restaurants? No. It means we price the risk appropriately and adjust advance amounts to match actual cash flow durability.

6. Use-of-Funds Assessment

This is the step that separates rigorous MCA underwriting from "send money and pray."

We want to know: what are you actually doing with this advance?

The best answers:

Inventory purchases from a specific vendor at a known discount
Equipment repair or replacement with a documented quote
Seasonal staffing or marketing campaign with projected returns
Bridge financing while waiting on contracted receivables

The answers that concern us:

"I need to catch up on everything" (vague = risky)
Paying off another MCA (stacking — we'll cover this in a moment)
Covering operating losses with no clear path to profitability

If you can articulate the use case, the expected return, and the timeline, you look like a borrower who has a plan. That's who we fund.

Real Industries, Real Deals

Because we work across a broad range of businesses, here are examples of actual industries we've underwritten recently:

Restaurants — A pizzeria in a high-traffic suburban location needing $80K for kitchen equipment upgrades. Six months of bank statements showed consistent $35K-$45K/month in deposits. Landlord verification confirmed a current 5-year lease. Funded at 1.32x, repaid in 6 months.

Healthcare — A multi-location dental practice seeking $200K for expansion into a third office. Medical receivables showed consistent insurance payments. Strong deposits, clean bank statements, no existing MCA positions. Funded at 1.28x.

Transportation — A trucking company needing $150K for fleet maintenance and fuel costs during peak season. Revenue was higher but showed more variability. We adjusted the advance amount and holdback percentage to accommodate the cash flow pattern. Funded at 1.38x.

Construction — A general contractor needing $120K to fulfill a municipal contract with milestone-based payments. We structured the advance around the expected receivables schedule. Funded at 1.35x.

These aren't theoretical examples. They represent the kind of businesses we work with every day, and the kind of underwriting that makes sure both sides succeed.

For more on what it takes to get approved, see our Qualifying for an MCA guide and our Bad Credit Business Funding guide for businesses that have credit challenges.

The Stacking Problem (And How We Prevent It)

The single biggest risk in the MCA industry right now is stacking — when a merchant takes multiple simultaneous advances from different funders.

Stacking is dangerous because the daily repayment percentages add up. If Funder A takes 10% of daily revenue and Funded B takes another 10%, that's 20% of the merchant's cash flow going to MCA repayment before any other expenses. Add a third position and the math becomes impossible.

When we uncover existing MCA positions during bank statement review, here's what happens:

We require a payoff of existing positions before funding (or as part of the new advance)
We verify no other MCA applications are pending with other funders
We may reduce the advance amount to account for the existing obligation
We decline the deal if the stacking pattern suggests the merchant is in distress

This isn't us being difficult. This is us protecting you from a situation where the daily repayment burden forces your business under. If your MCA broker is willing to fund you without reviewing your existing obligations, they are not looking out for your interests.

What This Means for Your Application

If you're considering a merchant cash advance, here's what a quality underwriting process should look like — and what you should demand from any broker or funder:

6+ months of bank statements — anyone funding with less isn't doing adequate due diligence
Confirmed business address and operational verification — a real business, at a real location
Actual review of existing debt — not just a checkbox on an application
Risk-based pricing — your factor rate should reflect your actual risk profile, not a one-size-fits-all number
A clear explanation of total costs — factor rate, holdback percentage, estimated repayment timeline, total repayment amount
A conversation about use of funds — if they don't ask what you need the money for, they don't care whether the advance makes sense for your business

Those are the standards we hold at MyCommercialFunding. They're the same standards I maintained at Pegasus, and they're the reason our default rates stayed in the 3-7% range instead of the industry's worst-case numbers.

Your business deserves a funding partner who does the work upfront. Not just on your deal — but on themselves.

Frequently Asked Questions

What documents are required for MCA underwriting? At minimum, you'll need 6 months of business bank statements. Most funders will also request a driver's license, a voided business check, and possibly recent tax returns. Additional documentation like landlord verification or proof of business ownership may be required for larger advances.

How long does MCA approval take? With complete documentation, initial approval decisions can be made in under 4 hours. Funding typically occurs within 24 hours of completed underwriting. Same-day funding is available in many cases.

Can I get an MCA with bad credit? Yes. MCA underwriting focuses primarily on business revenue and cash flow rather than personal credit scores. Our minimum credit score requirement is 500. For businesses with credit challenges, our Bad Credit Business Funding guide explains the full picture.

Do you verify business addresses and locations? Yes. As part of our underwriting, we verify that the business is operating from its claimed address and that lease obligations are current. This protects both the funder and the merchant from misrepresentation.

What happens if my business has an existing MCA? We review all existing MCA positions during underwriting. In many cases, we can fund a new advance that consolidates existing positions into a single daily payment — reducing your total holdback percentage. Stacking multiple MCAs is risky, and a responsible funder will help you avoid it. Apply today and we'll evaluate your full picture before making any recommendations.