Why do you want my bank statements?

When obtaining a small business loan, merchants often ask why bank statements are needed if the underwriter bases the numbers on project merchant processing.  There are two reasons why the underwriter wants to see merchant bank statements:

1. The underwriter wants to see what the merchant’s gross monthly sales are.  If the majority of a merchant’s business is Visa/MasterCard then this may limit the maximum amount of money that an underwriting can advance the merchant, or the maximum percentage the underwriter can withhold from the merchant.  The last thing a lender wants to do is harm the cash flow of the business.
2. A merchant cash advance is an unsecured loan.  There is no collateral or personal guarantor required and thus the method of funding is extremely risky on the lender’s side.  Once a merchant does get funded a Uniform Commercial Code (UCC) is filed on the business letting other lender’s know that the lender owns a percentage of the merchant’s future Visa/MasterCard sales.  In order for the merchant to receive another small business loan from another lender, the current lender must be paid off in full.  Thus, the reason why the underwriter wants to see bank statements is to make sure that the business owner does not still owe any other merchant cash advance companies future credit card receivables.
3. Finally, the underwriter wants to factor in any additional debt the merchant may have to insure that in making the automatic payments, the merchant’s cash-flow will not be harmed.