Average Daily Balance: Meaning in a Merchant Cash Advance
The average daily balance is the mean of a bank account's ending balance across every day in a period, usually a statement month. Funders use it to judge how much cushion the account carries between deposits and debits.
What does average daily balance mean?
Add up the balance at the end of each day in the month, then divide by the number of days. A business with high deposits that spends everything the same day ends up with a low average daily balance. A business that holds a steady reserve ends up with a high one. Many bank statements print the figure in the summary box.
Why does average daily balance matter to your business?
Revenue shows how much money comes in. The average daily balance shows how much stays. Funders compare the two, and a very low average next to strong deposits tells them the account has little room for another daily debit. Some programs set a minimum, and a higher balance generally supports a larger or cheaper offer.
How do you raise it honestly?
- Keep a reserve in the operating account rather than sweeping everything to savings each night.
- Time large payments soon after big deposits rather than just before them.
- Avoid letting the balance fall below zero, since negative days drag the average down fast.
What doesn't average daily balance show?
The average hides the pattern. Two accounts with the same average can look very different day to day, which is why funders also count negative days and look at the lowest balances.
Where will you see it?
On many business bank statements in the summary section. In underwriting worksheets. In decline reasons, sometimes phrased as "balances too low."
Which terms are related to average daily balance?
The full list is in the glossary. Owners ask about this in Do funders look at profit or revenue for an MCA?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.