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Underwriting
Also called credit analysis, risk assessment, credit decision.
The lender's assessment of whether and on what terms to fund, which in the bank-statement market is driven far more by cash-flow behaviour than by credit score or financial statements.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
What is actually read
On a fast working-capital or advance file, the bank statements are the underwriting. An analyst pulls monthly deposit totals and counts them, average daily balance, ending balances, negative days, NSF and overdraft occurrences, the number and size of recurring daily or weekly debits that look like other funders, and any pattern of transfers that suggests revenue is being moved. Deposit count matters as well as volume — twelve deposits a month from twelve customers reads differently from one deposit from one.
Credit score, time in business, industry code, entity status, and a UCC search sit alongside that. On larger or longer facilities the file expands to tax returns, interim financials, a debt schedule, receivables ageing, borrowing base detail and covenant modelling.
What the analyst is looking for
Capacity to carry the payment through a bad month, and evidence that the business's own numbers are real. The most common declines are not for weak credit. They are for negative days, NSFs, undisclosed positions, deposits that do not reconcile to stated revenue, a restricted industry, and insufficient operating history.
What comes back
Approved, declined, or approved with conditions — a smaller amount, a shorter term, weekly instead of daily, bank verification required, or a specific stip. Counteroffers are normal and negotiable, particularly on amount and frequency.
Where this one catches people
The belief that a good personal credit score is the deciding factor. In the bank-statement market it is a secondary input and frequently not the binding constraint; businesses with strong scores are declined for negative days every day of the week. The corollary is more useful: three months of clean statements with no NSFs, a positive average daily balance and no undisclosed debits will improve terms more reliably than anything done to a credit score in the same period.
Where you will meet this term
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Underwriting — common questions
What does underwriting mean?
The lender's assessment of whether and on what terms to fund, which in the bank-statement market is driven far more by cash-flow behaviour than by credit score or financial statements.
Where does underwriting catch people out?
The belief that a good personal credit score is the deciding factor. In the bank-statement market it is a secondary input and frequently not the binding constraint; businesses with strong scores are declined for negative days every day of the week. The corollary is more useful: three months of clean statements with no NSFs, a positive average daily balance and no undisclosed debits will improve terms more reliably than anything done to a credit score in the same period.
Is underwriting the same as an interest rate?
Underwriting is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does underwriting apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit, Invoice Financing.
Is there a worked example of underwriting?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside underwriting?
Average daily balance, Bank statements, NSF fee, Negative days, Stips.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.