MCA field guide
How average daily balance affects MCA approval
Why two merchants with the same monthly revenue can present very different liquidity profiles.
Quick answer
Average daily balance measures liquidity left in the account across the month. It helps distinguish healthy operating cushion from high deposit volume that is immediately consumed.
Revenue shows volume; ADB shows cushion
Average daily balance approximates how much cash remains in the operating account across the month. A merchant can deposit substantial revenue while ending most days near zero because expenses and existing payments consume it immediately.
Underwriters compare ADB with the proposed payment
A proposed daily withdrawal that is large relative to typical balances can create operational stress even when monthly revenue clears the minimum. Existing debt payments must be considered in the same cash-flow view.
Use consistent statement data
ADB may come from bank analytics or a lender’s own calculation. Record the source and statement period instead of presenting a rough guess as verified data.
Practical checklist
- Use a consistent statement window.
- Confirm whether the value comes from bank analytics or manual calculation.
- Compare ADB with proposed and existing payments.
- Review low points and negative stretches.
- Check for one unusually high balance that distorts the average.
- Keep the source and observation date with the value.
Common questions
Can strong revenue offset very low ADB?
Sometimes, but low liquidity may still make the proposed payment difficult. The lender decides.
Is ending balance the same as ADB?
No. Ending balance is one point in time; ADB averages balances across the period.
Why does source matter?
Different calculation methods and statement periods can produce different results.
Primary sources and context
- Consumer Financial Protection Bureau — Small business lending rule FAQsOfficial federal context for merchant cash advances and sales-based financing.
Methodology and corrections
This guide distinguishes calculations, common industry practice, and lender-specific policy. Criteria should be confirmed from the dated source on each lender profile. Report an error through the correction policy.