What I Look For in Merchant Cash Advance Underwriting

Ali Barkhordar, Founder and CEO of Ultimate Business Capital, outlines the firm's merchant cash advance underwriting framework: prioritizing cash flow analysis over credit scores, focusing on short-duration deals, clean bank statements, and proven renewal behavior.

When I look at a file, the first thing I check is the average daily balance in the business bank account. That single number tells me whether the business actually keeps cash or just moves it through. A business can show strong deposits and still spend more than it collects. If the balance does not support the payments the business owes, I pass.

More than one advance outstanding does not automatically disqualify a deal. The test is simple: if the revenue covers every remittance, there is room. If the payments already outrun the deposits, I pass. The merchant's actual revenue behavior decides the position, not a credit report.

The Reality of Merchant Cash Advance Underwriting

Every file that crosses my desk has already been approved. But a funder saying yes is not the same as me saying yes. This is where disciplined merchant cash advance underwriting separates performing portfolios from problem deals.

I do not underwrite FICO. I underwrite cash flow. Bank statements and remittance consistency are the basis of my decisions. The merchant's actual revenue behavior decides the position, not a credit report.

When I evaluate a deal, I look for three specific things:

First, I look for renewal strength. A merchant who takes an advance, pays it back cleanly, and comes back for more is the strongest signal in the market. That repeat behavior tells me more than any credit score because it is demonstrated behavior on the exact obligation I am buying. The faster the money comes back on those short deals, the less time I am tied to any one business. I do not sit in long deals.

Second, I look for short duration. Less remaining term means less time for a position to turn, and capital that comes back sooner to put into the next one.

Third, I look for a legal claim. Every deal I am in has a legal claim filed against the business and its future payments under UCC Article 9. The originating funder files that claim on public record. I hold a direct ownership position in the receivable alongside them.

I say no to new businesses with no track record. I say no to businesses that spend more than they bring in. I say no to deals where the price does not match the risk, and strong revenue with no actual cash in the bank. I do not bend the rules to fill a position.

Zero compromise. That is how I build a book that performs.