Every lender has a box
Brokers talk about a lender's "box": the set of deals it will look at. A deal inside the box gets read by an underwriter. A deal outside it usually gets a one-line decline, often within minutes, because the funder's intake team screens on a short list of numbers before anyone reads the file.
The box is not secret, but it is rarely written in one place. It lives in the lender's ISO guidelines, its onboarding deck, what its rep told you on the phone, and what it has actually funded for you. Your job is to know each box well enough that you never send a deal that was dead on arrival.
The criteria almost every funder uses
| Criterion | What it measures | Typical range |
|---|---|---|
| Minimum monthly revenue | True revenue (deposits minus transfers, loan proceeds and refunds), usually averaged over 3 to 6 months | $10,000 to $30,000; A-paper programs often $50,000 or more |
| Time in business | Months since the business started, from formation documents or the first statements | 3 to 12 months for an MCA; 24 months or more for term loans and lines |
| Credit | The guarantor's personal score | No minimum at some funders; 500 to 550 for C and D paper; 650 to 700 for A paper |
| Existing positions | How many advances the merchant is already paying | 0 to 1 for A paper; 2 to 4 for B and C; more only at funders that specialize in stacked files |
| Bank health | NSFs, negative days and average daily balance in recent months | Often 0 to 3 NSFs a month and a few negative days at most |
| Industries | What the business does | Most funders restrict a list, such as cannabis, adult, gambling, firearms or trucking owner-operators |
| States | Where the merchant is located | Some funders avoid states with heavier rules or where they are not set up |
- True revenueTrue revenue is a merchant's real monthly sales on the bank statements: total deposits minus transfers, loan and MCA proceeds, refunds, reversals and owner money.
- Time in business (TIB)Time in business (TIB) is how long a business has operated, usually counted in months from formation or start date. Funders set minimums by product.
- PositionsA position is one open cash advance on a merchant's account, numbered in the order taken: first position, second position and so on.
- Average daily balance (ADB)Average daily balance (ADB) is the mean of a bank account's end-of-day balances over a month. Funders use it to judge whether a merchant can carry daily payments.
- Negative daysNegative days are the days in a month when a merchant's bank account ends below zero. Funders cap them because each one risks a returned debit.
Some funders add rules of their own: no sole proprietors, no home-based businesses, a minimum number of deposits a month, a maximum combined holdback, or an advance capped at a multiple of monthly revenue. These matter just as much as the headline numbers. Our bank statements track explains how to measure each of them.
Paper grades and tiers
Funders grade deals, and the industry grades funders the same way. A paper means strong revenue, few or no positions, clean statements and good credit, priced at the lowest factor rates. D paper means thin margins, several positions or messy statements, priced high and funded by a smaller set of lenders who specialize in that risk.
- A paper: long history, clean bank, good credit, first position. Lowest cost, longest terms, strictest box.
- B paper: solid but with a blemish, such as a second position or a few NSFs.
- C paper: workable but risky: several positions, uneven deposits or weak credit.
- D paper: heavily stacked or troubled files. Short terms, high factors, few takers.
Many funders run more than one program, for example an A-paper program and a separate program for second positions. Treat each program as its own box. A deal that fails the top program can still fit the lender's other one.
- Paper gradePaper grade is shorthand for deal quality, A through D. A paper has strong revenue, credit and statements and gets the lowest factors; D paper is the riskiest.
- Factor rateThe multiplier that sets what a merchant repays on a cash advance: advance amount times factor rate equals the total payback, usually 1.10 to 1.55.
Hard lines and soft lines
Not every criterion is absolute. A restricted state or industry is usually a hard line: no exception, no matter how good the file looks. A credit minimum or an NSF limit is often soft: an underwriter may let a 590 score through when revenue is strong and the bank is clean. Learn which is which for each lender by asking its rep and by watching what gets approved.
Ask the rep directly
"What would make you decline this without reading it?" is a fair question for a new lender's ISO rep. The answer is its list of hard lines.
Why the box keeps moving
A lender's appetite is not fixed. Funders tighten when their own capital costs rise, when a vintage of deals defaults more than expected, or when a whole industry runs into trouble. They loosen when they have money to deploy and need volume. A funder that approved every restaurant you sent in spring may stop taking restaurants by fall.
- Watch for a run of declines with the same reason from one lender. That usually means its box changed before anyone told you.
- Read every guideline update a lender sends, and update your lender records the same day.
- Ask your reps at each funder, at least once a quarter, what they are looking for right now.
How the CRM helps
In Ferrylend, each lender's box is stored as criteria on the lender record: restricted states and industries, plus rules for revenue, time in business, credit, positions, average daily balance or negative days. Each rule is marked hard, soft or info, and lenders can have several programs with their own paper grade and amount range. See lender matching and Set up your lenders.
Questions
What is a lender's box in merchant cash advance?
A lender's box is the set of deals it will consider: its minimum monthly revenue, time in business, credit score, number of existing positions, bank health limits, and the industries and states it accepts. Deals outside the box are usually declined without a full review.
What does A paper mean?
A paper is the best grade of deal: strong and steady revenue, few or no existing advances, clean bank statements and good credit. It gets the lowest factor rates and longest terms, but the funders that buy it have the strictest criteria.
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