Underwriting and Evaluating Eligibility

Underwriting: The Engine of MCA

Predicting Future Revenue

In the world of Merchant Cash Advances, we don't look at what a business owns, but what it earns. Underwriting at Grey Stone is about evaluating future revenue capacity to ensure sustainable remittances.

Welcome. Underwriting is the engine of the MCA process. Unlike traditional lending which focuses on assets and credit scores, we evaluate a business's future revenue capacity. At Grey Stone, our mission is to identify sustainable cash flows that can support remittances without straining operations.

Key Underwriting Metrics

The Big Four

We analyze 3–6 months of bank statements to find the 'pulse' of the business. Pay close attention to Average Daily Balance (ADB) and NSF counts.

To determine eligibility, we look for four primary signals in bank statements. Click each metric to see why it matters to a Grey Stone underwriter. The Average Daily Balance, or ADB, indicates a liquidity cushion. Falling below $1,000 frequently is a significant risk indicator. NSFs and Overdrafts suggest cash management issues. Grey Stone typically caps acceptable occurrences at 3 to 5 per month. Average Monthly Revenue is our baseline. We look for consistency across the months to calculate the advance amount. Finally, Deposit Frequency. We prefer businesses with daily or near-daily deposits, indicating steady customer traffic.

Grey Stone’s Risk Appetite

Focusing on A/B Paper

Consistent with our institutional heritage at greystoneus.com, we prioritize stability. We aim for businesses with 1–2 years of history and avoid 'stacking'.

Grey Stone's risk appetite reflects our broader commercial finance expertise. We prioritize 'A' and 'B' grade paper, focusing on stable industries like healthcare and professional services. We look for at least one to two years of operational history. Crucially, we generally avoid 'stacking'—we aim to be the first or second position to ensure repayment priority.

Practice: Scrubbing the Statement

Clean Your Data

We only fund operating revenue. Click on the line items in this bank statement that should be scrubbed (subtracted) from the total revenue calculation.

Let's try a practical workflow. Examine this bank statement. Click on any deposit that isn't true operating revenue to 'scrub' it from our total. Great job. By scrubbing one-time injections, you've arrived at the true fundable revenue. Correct! Personal transfers, insurance payouts, and loan proceeds don't reflect the business's actual sales capacity. Wait, that looks like a customer payment. We want to keep regular sales in our calculation.

Scenario: The Seasonal Retailer

Consulting the Underwriter

A boutique clothing store has $80k/month revenue from March to May, but only $45k in June with 2 NSFs. What is your assessment?

Meet Sarah, a Senior Underwriter at Grey Stone. She's reviewing a seasonal retailer with a sudden June dip. Use the chat to ask her how she would evaluate the risk of 'stacking' or 'declining trends' in this specific case.

The Pitfall Detector

Spot the Trap

Examine the business profile and identify the critical flaw that would lead to an automatic decline at Grey Stone.

Underwriters must be detectives. Look closely at this business profile. One of these elements is a deal-breaker. Click on the critical pitfall. Spot on! An active tax lien can freeze a bank account, making it impossible for us to collect our remittances. This is an automatic decline. That's a concern, but not necessarily a deal-breaker. Look for something that threatens our legal ability to access the funds.