How I Evaluate a Merchant Cash Advance Using Failed Payments

My approach to evaluating a merchant cash advance emphasizes analyzing failed payments over total revenue to assess current business liquidity.

I do not originate loans. I purchase participations in performing merchant cash advance agreements after they have already begun repayment. Because I am buying into an existing cash flow stream, my underwriting methodology requires a highly analytical approach.

When reviewing payment histories, I examine failed payments before looking at total collections. Failed payments reveal whether a business actually had sufficient funds in their account on the exact day each payment was due. While total revenue demonstrates what a business has collected over time, failed payments provide a real-time snapshot of liquidity and cash flow management.

A missed payment from last week carries more weight in my analysis than strong performance from previous months because it reflects the current operational reality of the business.

This is how I evaluate a merchant cash advance, prioritizing recent behavioral data over historical performance metrics.