Do Funders Look at Profit or Revenue for an MCA?
Funders look mainly at revenue, meaning the money your business deposits, rather than profit. Your bank statements show deposits and the cash left after your bills, which is why a business with thin profits but steady sales often still qualifies for an advance.
Why does revenue come first?
A merchant cash advance is a purchase of future sales, so the funder's first question is how much your business sells and how steady that is. Profit matters too, but mostly as a check: a business losing money every month tends to run out of cash, and that shows in the balance and the negative days. Funders don't usually read your profit and loss statement for smaller advances. They read the bank statements, where they see deposits coming in and bills going out.
What gets counted as revenue?
- Card processing deposits and customer payments.
- Cash and checks you deposit from sales.
- Customer payments that arrive by app or transfer.
What doesn't count: transfers from your own accounts, loan proceeds, other advances, tax refunds and one time items like insurance payouts. Funders strip those out to find what the business truly sells.
When does profit come into it?
On larger advances, or for a line of credit or revenue-based financing, funders sometimes ask for tax returns or a profit and loss statement. They want to see that the business earns enough to carry the payment over the long run. If your books show big losses, have an explanation, like a one time expansion cost or heavy depreciation, ready.
What's the trap in thin margins?
Qualifying on revenue is useful, but it can also hide danger. A business with low margins carries a payment on a thin cushion. Before you accept, look at what's left each month after your costs, and make sure the advance payment fits inside it with room to spare. If it doesn't, a smaller amount is the better choice.
How do owner draws affect the picture?
How you pay yourself shows up in the statements. Large, frequent transfers to personal accounts reduce the balance and make the business look thinner than it is. A steady, predictable owner draw reads better than random withdrawals whenever cash appears. If you took a big distribution recently, say why. Funders understand that owners get paid. They want to see that what's left in the business is enough to run it and to carry the payment comfortably.
What if your revenue is seasonal?
Seasonal businesses have strong months and weak ones. Funders look at the full stretch of statements, not just the best month. Explain the season up front so a slow month reads as normal rather than as a decline.
How can Afterfirst help with this?
Call 877-FUND-654 and tell us roughly what the business sells in a typical month and what it spends. Send your statements and we'll show you how a funder counts your revenue, what they strip out and what that means for your offer.
What else do owners ask about this?
- Do I need tax returns to get a merchant cash advance?
- Can I get an MCA with a low average daily balance?
- Can a home based business get a merchant cash advance?
More short answers on this topic are on the your business and your file FAQ, and the funder fit checker runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. 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.