Glossary
MCA underwriting glossary
This glossary defines the terms merchant cash advance funders, lenders and brokers use when they underwrite from business bank statements. It covers true revenue, MCA stacking, positions, holdback, factor rate, debt-to-revenue, NSFs, average daily balance and negative days. Each term has a short definition and a link to the full method.
Average daily balance (ADB)
The average of an account's end-of-day balances over a period, usually a statement month. Funders use it to judge how much cushion a business keeps day to day. Easify reports ADB month by month.
Debt-to-revenue ratio
A measure of how much merchant cash advance debt a business carries relative to its sales. In Easify's report, it's MCA funding received in a period divided by true revenue in the same period. Funders define debt ratio differently, so always state the definition.
Factor rate
The multiplier that sets what a merchant repays on an advance. Payback = advance amount × factor rate. For example (made-up numbers), a 1.35 factor on $30,000 means $40,500 repaid.
Holdback
The share of a merchant's receipts that goes to repaying a merchant cash advance. When the payment is a fixed daily or weekly amount, the implied holdback is that payment divided by true revenue for the same period.
MCA stacking
Merchant cash advance (MCA) stacking is when a business holds more than one advance at the same time, with each funder collecting from the same account. More positions mean less of each deposit is left to run the business.
Negative days
The number of days in a period on which the account's end-of-day balance was below zero. A rising count is a common sign of cash-flow strain. Easify reports negative days month by month.
NSF (non-sufficient funds)
An item returned or charged because the account didn't have enough money to cover it, often with an NSF fee. Underwriters count NSFs per month. Frequent NSFs suggest the business is struggling to meet obligations.
Owner injection
Money the business owner puts into the business account from outside, such as personal funds. It isn't revenue from sales, so it's excluded from true revenue.
Payment-to-revenue
Existing MCA payments in a period divided by true revenue in the same period. It shows how much of the merchant's sales already goes to funders before a new advance is added.
Position
An existing merchant cash advance a business is repaying. "First position" is the earliest. A merchant "in three positions" is repaying three advances at once. Easify lists positions by lender name.
Reconciliation (statement balancing)
Checking that a statement's transactions add up to its own printed figures: opening balance plus credits minus debits equals the closing balance, line by line through the running balance. Easify balances every statement this way and flags files that don't reconcile.
True revenue
The part of a business's deposits that comes from its sales. It excludes MCA and loan funding, transfers between the merchant's own accounts and owner injections. Funders size an advance against true revenue rather than gross deposits.
How true revenue is calculated
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FAQ
What is average daily balance (ADB)?
The average of an account's end-of-day balances over a period, usually a statement month. Funders use it to judge how much cushion a business keeps day to day. Easify reports ADB month by month.
What is debt-to-revenue in MCA underwriting?
A measure of how much merchant cash advance debt a business carries relative to its sales. In Easify's report, it's MCA funding received in a period divided by true revenue in the same period. Funders define debt ratio differently, so always state the definition.
What is a factor rate?
The multiplier that sets what a merchant repays on an advance. Payback = advance amount × factor rate. For example (made-up numbers), a 1.35 factor on $30,000 means $40,500 repaid.
What is a holdback in a merchant cash advance?
The share of a merchant's receipts that goes to repaying a merchant cash advance. When the payment is a fixed daily or weekly amount, the implied holdback is that payment divided by true revenue for the same period.
What is MCA stacking?
Merchant cash advance (MCA) stacking is when a business holds more than one advance at the same time, with each funder collecting from the same account. More positions mean less of each deposit is left to run the business.
What are negative days?
The number of days in a period on which the account's end-of-day balance was below zero. A rising count is a common sign of cash-flow strain. Easify reports negative days month by month.
What does NSF mean on a business bank statement?
An item returned or charged because the account didn't have enough money to cover it, often with an NSF fee. Underwriters count NSFs per month. Frequent NSFs suggest the business is struggling to meet obligations.
What is an owner injection?
Money the business owner puts into the business account from outside, such as personal funds. It isn't revenue from sales, so it's excluded from true revenue.
What is payment-to-revenue?
Existing MCA payments in a period divided by true revenue in the same period. It shows how much of the merchant's sales already goes to funders before a new advance is added.
What is a position in a merchant cash advance?
An existing merchant cash advance a business is repaying. "First position" is the earliest. A merchant "in three positions" is repaying three advances at once. Easify lists positions by lender name.
What is bank statement reconciliation in underwriting?
Checking that a statement's transactions add up to its own printed figures: opening balance plus credits minus debits equals the closing balance, line by line through the running balance. Easify balances every statement this way and flags files that don't reconcile.
What is true revenue?
The part of a business's deposits that comes from its sales. It excludes MCA and loan funding, transfers between the merchant's own accounts and owner injections. Funders size an advance against true revenue rather than gross deposits.