Glossary
MCA underwriting glossary
Clear, neutral definitions of the merchant cash advance and bank-statement-underwriting terms brokers, ISOs, and funders run into every day — from factor rate and holdback to stacking, NSF activity, and true external revenue.
MCA basics
Core MCA terms
- Merchant Cash Advance (MCA)
- A merchant cash advance is a form of financing in which a funder provides a lump sum to a business in exchange for a fixed portion of its future receivables. It is structured as a purchase of those future receivables rather than a traditional loan, so repayment is tied to the business's cash flow rather than a fixed interest schedule.
- Factor rate
- The factor rate is the multiplier used to calculate the total amount a merchant repays on an advance. An advance of $50,000 at a factor rate of 1.3 means the merchant repays $65,000 in total. Unlike an annual percentage rate, a factor rate is a flat multiplier and does not compound over time.
- Holdback / retrieval rate
- The holdback, sometimes called the retrieval rate, is the percentage of the merchant's daily or weekly receipts withheld to repay the advance. A 12% holdback means roughly 12 cents of every dollar collected goes toward repayment until the agreed amount is satisfied.
- Daily / weekly remittance (debit)
- A remittance is the recurring repayment a merchant sends to a funder, typically pulled automatically on a fixed daily or weekly schedule. Consistent, equal debits on a regular cadence are one of the clearest signals of an active advance, which is why MetrikData groups them when surfacing existing positions.
- Debt service
- Debt service is the total amount a merchant must pay across all active advances and obligations over a given period, usually expressed as a daily or weekly figure. Weighing debt service against real revenue shows how much incoming cash is already committed before a new advance is considered.
- MCA position
- An MCA position is a single active advance a merchant is currently repaying, identified by its recurring remittances, payment amount, and the funder receiving them. A merchant may carry several positions at once; MetrikData presents each one with the source transactions behind it.
- Stacking
- Stacking is when a merchant takes on a new advance while one or more existing advances are still being repaid, layering multiple daily or weekly remittances on top of each other. Heavy stacking can quietly consume a large share of daily cash flow and is a common precursor to default, which is why stacking detection focuses on finding every position a merchant already carries. In a statement it looks like several distinct funders, each on its own rhythm:05/06 FUNDER ONE DES:MERCHDEBIT -$1,200.00 05/09 FUNDER TWO DES:PAYMENT -$500.00 05/10 FUNDER THREE DES:PAYMENT -$1,000.00 05/13 FUNDER ONE DES:MERCHDEBIT -$1,200.00 05/16 FUNDER TWO DES:PAYMENT -$500.00
- Cadence rule (MCA vs loan)
- The cadence rule is how payment frequency separates an MCA position from ordinary debt service: daily or weekly debits to a funder indicate an active advance, while monthly or roughly every-15-days debits indicate a term loan or installment — no real MCA collects once or twice a month. Loans still consume cash flow, but they are not stacking positions, so counting them as positions inflates a merchant's apparent stack.
- New position
- A new position is an advance opened during the statement period — funding received, with collections just beginning. Because one or two debits can't yet establish a rhythm, a new position is flagged rather than counted: it feeds the risk picture, but its type (MCA or loan) is confirmed only when the next statement shows the cadence. A debit that returns most of the advance amount usually means the advance was cancelled, not serviced.
- Single-debit payee (review)
- A single-debit payee is a lender-looking counterparty with exactly one debit in the statement. One hit is indistinguishable from a monthly loan payment, a fee, or a one-off — so it is surfaced for review instead of being silently dropped or counted as a position. Across two or more statements, one debit per month on a similar day and amount confirms a monthly loan.
Cash flow & risk
Cash-flow and risk terms
- Deposit volume (gross deposits)
- Deposit volume, or gross deposits, is the total of all money flowing into a merchant's bank account over a period, before any deductions. Because it includes transfers, loan proceeds, and other non-sales credits, gross deposit volume can overstate how much a business actually earns.
- External revenue (true revenue)
- External revenue, often called true revenue, is the portion of deposits that represents genuine sales income from outside the business — payment processors, card settlements, and customer payments — with internal transfers and advance proceeds excluded. MetrikData separates external revenue from gross deposits so leverage is measured against money the business truly brings in.
- MCA burden
- MCA burden is the share of external (true) revenue consumed by financing payments during the period — the underwriter's core leverage figure. Two numbers matter: MCA burden (position payments ÷ true revenue) and debt-to-revenue ((position + loan payments) ÷ true revenue). The denominator is as important as the numerator: dividing by gross deposits — which include advance proceeds and transfers — understates the real pressure.True revenue (processors, customer payments) $20,000 MCA position payments (3 funders, weekly) $7,800 Term-loan payments $3,950 MCA burden 7,800 ÷ 20,000 = 39.0% Debt-to-revenue 11,750 ÷ 20,000 = 58.75%
- Refund / reversal
- A refund or reversal is money returned to the account — a refunded payment, a rewards redemption, or a bank line such as RETURN OF POSTED reversing a debit that bounced. These credits are neither revenue nor fresh financing, even when the sender is a funder: a refund from a lender is returned money, not a new advance. A reversal paired with its original debit also means that payment never actually happened — a cash-flow stress signal worth noting.
- Negative-balance days
- Negative-balance days are days on which a merchant's account balance fell below zero. A pattern of negative days signals thin cash reserves and elevated risk, since the business is regularly spending more than it holds. MetrikData counts these days directly from daily balances in the statements.
- NSF (non-sufficient funds)
- An NSF, or non-sufficient funds event, occurs when a transaction is attempted against an account that lacks the balance to cover it, often triggering a returned payment and a fee. Frequent NSF activity points to cash-flow strain and is a meaningful risk signal in bank statement review.
- ACH (Automated Clearing House)
- ACH (Automated Clearing House) is the electronic network used to move funds between U.S. bank accounts. Most MCA remittances are collected by ACH debit, so reading ACH descriptors in a statement is central to identifying who is pulling repayments and how often.
Statements & roles
Statement and industry terms
- Bank statement underwriting
- Bank statement underwriting is the practice of assessing a business's financial health primarily from its bank statements rather than tax returns or formal financials. It examines deposit volume, balances, negative days, NSF activity, and existing obligations to build a cash-flow picture. MetrikData supports this work through bank statement analysis that surfaces these figures with the transactions behind them.
- Funder
- A funder is the company that provides the capital for an advance and collects repayment directly from the merchant. Funders carry the financial risk of the advance and rely on accurate cash-flow review to price and approve deals.
- ISO (Independent Sales Organization)
- An ISO, or Independent Sales Organization, is a company that sources and packages merchant deals and submits them to funders, typically earning a commission. ISOs often review statements up front to present qualified, well-documented deals.
- Broker
- A broker connects merchants seeking financing with funders, gathering documentation and shopping a deal to find a fit. Brokers and ISOs overlap in practice, and both benefit from a fast, accurate read of a merchant's statements before submission.
Products & structures
Products and deal structures
- Revenue-based financing (RBF)
- Revenue-based financing is the broader family of products — MCAs included — where capital is repaid as a share of ongoing revenue rather than on a fixed loan schedule. E-commerce platforms market it under many names, but on a bank statement the label doesn’t matter: the payment cadence does. Weekly pulls read as advance-style positions; monthly or semi-monthly debits read as term-loan-style debt service.
- Purchase of future receivables
- The legal structure of an MCA: the funder buys a specified dollar amount of the business’s future revenue at a discount, rather than lending money at interest. There is no rate accruing and no maturity date — just an amount of receivables sold and an amount still to be delivered, which is why cost is quoted as a factor rate.
- Specified percentage
- The share of ongoing revenue the merchant has contractually agreed to remit — the heart of the purchase structure. Fixed daily or weekly payment amounts are sized to approximate this percentage of expected revenue, which is why they change when revenue is re-benchmarked.
- Reconciliation (true-up)
- The clause letting a merchant request a payment adjustment when revenue drops, so remittances track the specified percentage of actual rather than projected revenue. On a statement it appears as a payment amount stepping down mid-stream — one reason positions are identified by payee and cadence, not by a constant amount.
- Direct lender / direct funder
- A funder that advances capital from its own balance sheet, as opposed to a broker or ISO that sources deals and places them with funders. On a bank statement the distinction collapses: the entity pulling the ACH remittance is the funder of record, regardless of who packaged the deal.
- Split / lockbox repayment
- A repayment structure where the card processor (or a lockbox bank account) routes the holdback to the funder before the deposit reaches the merchant’s account. The statement then shows reduced net settlements instead of visible debits — a reason a merchant’s position count can be higher than the ACH activity alone suggests.
- Consolidation (and reverse consolidation)
- Combining several open positions into one new advance: existing balances are repriced at a new factor over a longer term, so the daily payment usually falls while the total payback rises. On statements it reads as several funder debits stopping in the same window while a single new payee begins.
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