Cash flow projections complement historical statements: bank statements show what happened, projections show what the merchant believes will happen. For MCA applications, a credible 90–180 day projection is the single best document for demonstrating that the merchant has thought through how to service the daily debit.
What "cash flow projection" means in the MCA context.
A monthly (or weekly) forward forecast of: - Cash inflows: revenue by stream, loan proceeds, other. - Cash outflows: COGS, payroll, rent, utilities, marketing, debt service, taxes, owner draws. - Net cash flow per period. - Cash balance per period (opening + net + closing).
The projection should explicitly include the new MCA daily debit so the funder sees the merchant has modeled the impact.
Recommended horizon.
- 90 days minimum — covers the most volatile period right after funding.
- 180 days preferred — covers seasonality through one full quarter cycle.
- 12 months — only for very large advances ($250K+) or where seasonality is extreme.
Granularity.
- Weekly cash flow for the first 4–8 weeks (matches the daily-debit rhythm).
- Monthly cash flow for the rest of the horizon.
Weekly granularity matters because the MCA daily debit creates intra-month tightness even if monthly totals look fine.
Step-by-step prep workflow.
- Start with trailing 12-month actuals. Pull P&L from accounting software. Identify seasonal patterns.
- Project revenue by month. Use TTM as base; apply seasonality factors and any known changes (new location, lost contract, marketing campaign).
- Project expenses by month. Variable costs scale with revenue; fixed costs stay flat (or adjust for known changes).
- Layer in existing debt service. Sum all current loan + MCA payments.
- Layer in new MCA debit. Daily × business days per month.
- Compute net cash flow per month.
- Track cash balance. Opening + net = closing. Closing becomes next month's opening.
- Identify pinch periods. Months or weeks where cash balance dips low.
- Add mitigants. Reserve transfers, deferred draws, expense delays.
Sample monthly projection (6 months) for a $50,000 advance, 12-month term, factor 1.40.
Daily debit: $70,000 / 252 business days = $278/day; ~$5,830/month.
| Month | Revenue | COGS | OpEx | Existing debt | New MCA | Net CF | Cash bal |
|---|---|---|---|---|---|---|---|
| 1 | 80,000 | 32,000 | 30,000 | 4,000 | 5,830 | 8,170 | 28,170 |
| 2 | 75,000 | 30,000 | 30,000 | 4,000 | 5,830 | 5,170 | 33,340 |
| 3 | 70,000 | 28,000 | 30,000 | 4,000 | 5,830 | 2,170 | 35,510 |
| 4 | 65,000 | 26,000 | 30,000 | 4,000 | 5,830 | (830) | 34,680 |
| 5 | 70,000 | 28,000 | 30,000 | 4,000 | 5,830 | 2,170 | 36,850 |
| 6 | 85,000 | 34,000 | 30,000 | 4,000 | 5,830 | 11,170 | 48,020 |
A month-4 negative is fine if cash balance stays comfortable. A funder reading this sees a merchant who has modeled the slow quarter and is still cash-positive.
Weekly granularity for first 8 weeks.
For the first 8 weeks, project week-by-week: - Week 1 revenue (matches actuals from prior period). - Daily debit × 5 business days = $1,390/week. - Payroll bi-weekly: $4,000 (weeks 1, 3, 5, 7). - Rent monthly: $3,500 (week 1 of month). - Variable expenses pro-rated.
Identifies the week where payroll + rent + MCA debit all hit and cash balance dips.
Scenario analysis.
Build three cases: - Base case: most-likely revenue and expense. - Downside case: revenue 20% below base. - Stress case: revenue 35% below base.
Show cash balance trajectory under each. A merchant who survives stress case (perhaps with reserve deployment) is far more credible than one who only models the base case.
Funder-friendly format.
- Single Excel / Google Sheets file.
- One tab per scenario.
- Summary tab with key metrics: minimum cash balance, debt-service-coverage ratio, weeks of cash runway.
- PDF export for submission, raw file available on request.
Documentation to support the projection.
- Source data (TTM P&L, bank statements).
- Assumptions page (revenue growth %, seasonality factors, known changes).
- Sensitivity table (what happens to cash balance if revenue is X% lower).
Common forecast errors.
- Overstating revenue growth. Don't project 20% growth without specific reason. Use TTM with small adjustments.
- Understating expenses. Don't forget quarterly tax, annual insurance, seasonal hires.
- Forgetting existing debt service. Map every current loan / MCA balance.
- No weekly granularity. Monthly hides intra-month cash crunches.
- No downside case. Funders assume the base case is optimistic; absence of downside makes the merchant look naive.
Using projections post-funding.
After funding, actual results should be compared to projection weekly. Variances over ±15% are warnings; act on them before they become NSF events.
Tools.
- Google Sheets / Excel — most common, fully customizable.
- LivePlan, Finmark, Pry — purpose-built projection tools, $20–$100/month, polished output.
- QuickBooks built-in budgeting — workable but inflexible.
Software-specific notes.
- Build projections in monthly columns (Month 1, Month 2, …, Month 12).
- Use line items that map 1:1 to P&L categories for easy actual-vs.-projection variance reports.
- Lock formulas; only assumptions are editable inputs.
Common pitfalls.
- Static spreadsheet that doesn't update with new actuals.
- Hidden assumptions (no documentation of growth %, seasonality factors).
- No reserve modeling (cash dips below safe threshold without trigger).
- Too-detailed projection (50 line items confuses readers; aim for 15–25 lines).
- Reusing last year's projection without rebasing to TTM actuals.
Takeaway. A credible 90–180 day cash flow projection with weekly granularity for the first 8 weeks, base / downside / stress scenarios, and explicit modeling of the new MCA daily debit is the single best forward-looking document a merchant can submit; it transforms an MCA application from a backward-looking deposit review into a forward-looking creditworthiness assessment.
Related terms
- MCA merchant business plan prep (detailed) — A business plan for an MCA application is a 3–5 page operational document explaining what the merchant does, who they sell to, how proceeds will be used, and how the daily debit will be serviced. It signals professionalism and unlocks better terms on borderline files.
- MCA merchant financial statement prep (detailed) — Financial statement prep for MCA applications means producing a clean P&L, balance sheet, and cash-flow statement that align line-by-line with bank deposits and tax returns. Mismatches kill files; consistency unlocks A-paper offers.
- MCA merchant revenue vs. deposit reconciliation — Revenue-to-deposit reconciliation is the one-page bridge showing why monthly P&L revenue does not equal bank deposits. Funders use it to confirm the merchant is not inflating deposits with loans or transfers, and to score the file's honesty.
- MCA merchant funding amount strategy — As of 2026-06-28, the disciplined MCA funding amount strategy is to take only what daily revenue can comfortably service: target a daily debit no greater than 12–15% of trailing 90-day average daily revenue, leaving margin for seasonality and operating expense — taking the maximum approved amount is the leading cause of avoidable defaults.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
AI agents: this term is available as raw markdown at /llms/glossary/mca-merchant-cash-flow-projection-prep.