MCAs are designed to fund businesses that banks decline, so the bar is low compared to traditional lending. But there's still a floor. Below: the six things that take you off the funder list before any human looks at the file.
1. Active bankruptcy
If you have an open Chapter 7, 11, or 13 bankruptcy that has not been discharged, no MCA funder will write the deal. The funder cannot enforce the personal guarantee or recover from a debtor under bankruptcy protection. Wait until discharge — typically 4-6 months for Chapter 7, longer for 11/13.
Discharged bankruptcies (closed) are not auto-disqualifiers but they color the file. Most funders accept files post-discharge with normal underwriting; the factor rate may be slightly higher.
2. Open federal or state tax lien over $50,000
Funders see large tax liens as a primary repayment risk — the IRS or state revenue department has senior claim on assets. A lien under $10,000 is usually fine; between $10K-$50K the funder will ask for a payment plan and IRS-issued subordination if required; over $50K, most funders pass.
Specialty funders work with larger liens but the factor rate is materially higher (1.45+) and the advance amount is capped.
3. Less than 4 months in business
Almost no funder writes a deal under 4 months in business. The risk model says default rates on businesses this fresh are too high to underwrite. Wait until at least month 6, ideally month 12, before applying. The factor improves dramatically with each month of operating history.
4. Monthly revenue under $8,000
Below ~$8,000 per month in business bank deposits, the daily payment math doesn't work. A funder writing a $10K advance against $5K/month revenue is asking for a default. Most funders cap at $10K minimum monthly revenue; some specialty funders will look at $8K but the file has to be otherwise strong.
If you're below this threshold, your options are: SBA Microloan (up to $50K, designed for newer businesses), business credit card, or wait until revenue grows.
5. Restricted industries
The industry-restriction list is fairly standard across MCA funders:
- Cannabis and CBD (legal gray area, banking issues even for legal-state operations)
- Adult entertainment
- Firearms and ammunition manufacturing/sales
- Gambling operations
- Money services and check cashing
- Non-profit organizations
- Government entities
- Real estate development and flipping (project-based, not recurring revenue)
- Some funders also restrict: payday lending, debt collection, multi-level marketing
Some specialty funders work with cannabis or firearms but the funder pool shrinks dramatically and the factor rate is 1.45+.
6. Bank statement red flags
Five statement-level signals that auto-decline most files:
- 8+ NSFs in any single month. Indicates operational discipline issues that signal default risk.
- 5+ negative days per month consistently. Suggests the business operates without runway.
- Average daily balance under 3% of monthly revenue. Razor-thin cushion; any disruption defaults the advance.
- 4+ active MCA positions visible in daily ACH debits. Stacked too deep for most funders to underwrite over.
- Steady declining revenue trend over 3 months. Funder priced against what's coming, not what was. A clear downtrend changes the math.
Any one of these can be worked around by other strengths in the file. Two or three together typically auto-decline.
What's NOT a disqualifier
Common merchant fears that don't actually matter:
- Low credit score (down to 500 at most funders, lower at specialty)
- Existing single MCA position (renewals and consolidations are common)
- Prior MCA payoff history that was clean (helps, doesn't hurt)
- Cash-heavy business (different underwriting; not a decline)
- Single-state operation (geography rarely declines outside specifically restricted states for specific funders)
- Mid-size NSFs (1-4 per month, generally fine)
If you're disqualified now, what changes that
Most disqualifications are temporary or fixable:
- Bankruptcy → wait for discharge
- Tax lien → set up IRS payment plan, get subordination letter if required
- Time in business → operate cleanly for 60-90 more days
- Low revenue → grow the business; reapply when consistent above $10K/month for 2-3 months
- Bank statement red flags → fix the operational issues; submit 2 clean months in front of the worst month
Industry restrictions don't change. Everything else has a path.
Sources & References
- Bank denial and small business credit access figures cited in this piece are derived from the Federal Reserve Small Business Credit Survey. Approval rates for small business credit applications at large banks have ranged from approximately 13%-31% across recent survey years, depending on bank category and reporting period.
- Small business finance landscape and lending program data: SBA Office of Advocacy.
- Merchant cash advance industry standards and disclosure practices: Small Business Finance Association (SBFA).
- Commercial financing disclosure regulations referenced (NY FAIR Act, CA SB 1235/666/362, VA, UT) are summarized from the published statutes; consult counsel for specific compliance application.