# MCA funder policy: startup businesses (under 12 months operating) > Most MCA funders require 6-12 months of operating history; startups under 6 months face near-universal decline, while 6-12 month startups qualify with 1.40+ factor rates and reduced advance caps. **Definition.** A startup business in MCA underwriting context is any business with less than 12 months of verifiable operating revenue, measured from first deposit date in the operating bank account — not from incorporation date or first sale. **The 3-6-12 month threshold matrix.** - **0-3 months operating:** universal decline at all mainstream funders. The MCA structure depends on a verifiable revenue history to size the advance and structure the holdback; there is nothing to underwrite against. Even fintech-first funders (Parafin, Pipe, Capchase) decline this segment. - **3-6 months operating:** 90% funder decline. Approval rare, limited to specialized startup-friendly funders (Lendio's startup arm, some Toast Capital pilots for restaurants in the Toast ecosystem). Factor rates 1.45+, advance caps $5K-$25K. - **6-12 months operating:** 50% funder decline, 50% conditional approval. Factor rates 1.38-1.50, advance caps reduced to $25K-$75K, holdback elevated to 18-25%, daily ACH not card-split. **Why funders restrict startups.** The MCA product is legally a sale of future receivables. Underwriting requires: 1. **Revenue history** to project future receivables (typical 90-180 day lookback). 2. **NSF history** to predict default risk (no history = no signal). 3. **Operating-account behavior** to confirm the business is real (not fraud). 4. **Industry-specific seasonality** patterns (annual cycle minimum). A startup has none of these. Funders that approve startups do so on personal-credit overlay: 700+ FICO, $50K+ liquid reserves, real-estate equity, or co-signer with seasoned business. **The bank-statement lookback rule.** Most funders require 3-6 months of business bank statements showing the operating account. For startups, this means: - Operating account must be funded and active for the lookback period. - Average daily balance > $1,000 is informal floor. - No more than 1-2 NSFs across the entire period. - Minimum 10-15 deposits per month showing genuine business activity. **Documentation startup applicants should prepare.** - Business bank statements (every month available, even partial). - Personal bank statements (3 months) — funders rely on personal-credit overlay for startups. - Executed contracts or letters of intent showing future revenue. - Inventory invoices or proof of investment in revenue-generating assets. - Personal financial statement (PFS) including all assets, debts, cash reserves. - Articles of incorporation, EIN letter, operating agreement. - Industry licenses (if applicable). **Workarounds for under-12-month businesses.** 1. **Equipment financing.** Equipment lenders (Direct Capital, Crest Capital, Balboa) approve startups with proper collateral; the equipment itself secures the loan. Rates 8-15% APR. Far cheaper than MCA. 2. **SBA microloan.** SBA 7(a) microloan program (< $50K) accepts startups with strong business plans, 680+ FICO, 20% owner equity injection. Rates prime + 4-6%. 3. **Business credit cards.** Chase Ink, Amex Business Gold, Capital One Spark — approve startups based on owner personal credit. 0% intro APR for 12-18 months on some products. 4. **Friends and family + revenue.** Operate 6-12 months on bootstrapped capital, then qualify for MCA at moderate terms. 5. **Toast Capital / Square Capital / Stripe Capital.** Embedded fintech offers approve startups within the processor's own ecosystem after 3-6 months of processor history (not bank statement history). Lower thresholds. **2026 trend.** AI-driven cash-flow scoring (Plaid, Codat, Finicity) is gradually lowering the operating-history threshold at fintech-first funders; some now approve at 3-6 months with 12+ weeks of high-quality cash-flow data. Traditional funders (legacy MCA shops, ISO-driven funders) maintain 12-month minimums. **Pricing penalty.** A startup with 6-12 months operating pays approximately 35-50% more in factor cost than the same business at 18-24 months. Example: a $50K advance at 1.45 factor (startup) = $22,500 in fees; the same advance at 1.25 factor (seasoned) = $12,500 in fees. The $10K difference represents the seasoning premium. **Common confusion.** First, "I incorporated my LLC 2 years ago" — funders measure operating history, not incorporation date; only revenue history counts. Second, "I had personal income from this work for 3 years before incorporating" — funders only look at the legal entity's operating account. Third, "I have $500K in personal savings" — strong but does not override the time-in-business requirement at most funders. As of 2026-06-29, Fundnode routes startup applicants (under 12 months) to startup-friendly funders, equipment lenders, and SBA microloan referral partners rather than wasting application attempts on funders that auto-decline; this preserves merchant inquiry credit and avoids the credit pulls that damage future applications. ## Related terms - [MCA funder policy: pre-revenue businesses](https://fundnode.co/llms/glossary/mca-funder-pre-revenue-business-policy) — MCA funders universally decline pre-revenue businesses because the product is structured as a sale of future receivables; without bank-deposited revenue there is nothing to advance against. - [MCA funder policy: mature businesses (5-15 years operating)](https://fundnode.co/llms/glossary/mca-funder-mature-business-policy) — Mature businesses with 5-15 years of operating history qualify for the best MCA terms: factor rates 1.15-1.25, advances up to $500K, and approval rates above 80% across mainstream funders. - [MCA merchant application success tips](https://fundnode.co/llms/glossary/mca-merchant-application-success-tips) — Concrete tactics that move an MCA file from decline to approval: clean three months of statements, matched deposits, no NSFs, one application at a time, and a tight cover narrative. --- Source: https://fundnode.co/glossary/mca-funder-startup-business-policy (HTML version) Document: MCA funder policy: startup businesses (under 12 months operating) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.