# MCA merchant business plan prep tips > As of 2026-06-28, MCA funders rarely require a full business plan, but a 1–2 page use-of-funds memo with growth context and ROI math improves borderline approvals and can earn better factor rates by signaling the merchant is a thoughtful operator, not a desperate borrower. Unlike SBA lending where a 20–40 page business plan is mandatory, MCA underwriting is overwhelmingly bank-statement-driven and rarely demands a plan. Most funders' application forms do not even ask for one. That said, a short, well-constructed use-of-funds memo with growth context is a high-leverage prep step that costs the merchant 30 minutes and can move a file from "borderline approved" to "approved with better terms." **When a business plan or memo helps.** - Borderline files where automated decisioning is on the fence. - Renewal applications where the merchant wants larger or better terms than the prior advance. - A-paper merchants applying for premium products with stricter underwriting. - Industries with inherent risk perception (cannabis-adjacent, crypto-adjacent, gun retail) where context matters. - Newer businesses (12–24 months operating) where forward narrative offsets short history. **When a full plan is required.** - Almost never for MCA. If a funder requests a "full business plan," they are likely actually running a small-business term loan product or a hybrid SBA-bridge product. Confirm what they actually want before spending days writing. **The 1–2 page use-of-funds memo (the practical standard).** Sections: - **Use of funds.** Specific allocation: "$30K inventory for Q3 buildup, $20K hiring two seasonal employees, $15K marketing campaign launching Aug 15." Beats "working capital." - **Expected ROI.** Math: "Inventory turn 6x at 35% margin = $63K incremental gross profit over 6 months on $30K. Hiring drives 2 new locations of capacity. Marketing has historical 4:1 ROAS." - **Why now.** Timing rationale: "Q3 is peak season for our category; we need stock in place by August 1. Last year we ran out of inventory by mid-September and missed an estimated $80K in sales." - **How the daily debit fits.** Show that the projected post-advance cash flow comfortably covers the new daily debit. "Projected average daily revenue post-funding is $4,200; new debit is $580 (14% of daily revenue)." - **Repayment confidence.** One sentence: "Even in a downside scenario where revenue stays flat at current run-rate of $X, we can comfortably service the debit at Y% of daily revenue." **The growth-context paragraph (high-leverage).** Three sentences positioning the business: - What's working: "Revenue is up 32% YoY driven by new wholesale channel." - What's coming: "Two new locations opening Q4." - Why MCA over alternatives: "MCA fits our 4-month working capital need; SBA timing does not work for Q3 inventory." **The market and competitive context (only for borderline files).** One paragraph for newer or harder-to-underwrite industries: - Market size and growth. - Competitive position (where the business plays vs. competitors). - Defensibility (why customers come to this business, not a competitor). Skip for mature, simple industries (restaurants, trucking, retail) where funders already understand the dynamics. **Format and length.** - 1–2 pages, single-spaced. - 11pt font, normal margins. - PDF, named clearly: "ABC-Co-Use-of-Funds-Memo.pdf". - Plain prose, not slide-deck-style bullets. - Signed and dated by the principal. **What NOT to include.** - Full hockey-stick 5-year projections (reads as overpromising). - Detailed competitive analysis with funder comparisons (reads as pitch deck). - Personal narrative about why the founder started the business (irrelevant to MCA underwriting). - Confidential trade-secret information. - Aspirational valuation talk. **The financial-projection mini-table (if included).** Keep simple: - Next 6 months projected monthly revenue. - Next 6 months projected monthly EBITDA. - Monthly daily-debit total cost. - Net cash flow after debit. A 6-month table is more credible than a 5-year one. Pad assumptions conservatively — funders penalize obviously inflated projections. **Industry-specific narrative.** - **Restaurants.** Lead with same-store sales trend, average ticket, covers per day; explain seasonality. - **E-commerce.** Lead with ROAS by channel, repeat-customer rate, AOV; explain ad-spend timing. - **Trucking.** Lead with lane mix, deadhead percentage, contract vs. spot mix; explain fuel hedging. - **Construction.** Lead with backlog, win rate, average project size; explain WIP financing. - **Service businesses.** Lead with customer concentration, recurring revenue percentage, retention rate. **Renewal-specific memo content.** For renewal applications, the memo should include: - Performance of the prior advance: "Funded $50K, paid down $34K (68%) in 4 months, on-time daily debits with zero missed payments." - Updated revenue: "Trailing 12-month deposits up 18% since prior advance." - New use case for the renewal: separate from the prior advance's purpose. **Common pitfalls.** - Writing a 20-page plan when the funder wants 2 pages. - Aspirational projections (3x revenue growth in 12 months) that no underwriter believes. - Vague use-of-funds ("working capital and growth") that does not differentiate from any other application. - Missing the math on how the daily debit will be serviced. - Burying the use-of-funds at the end of a marketing-style document. **Takeaway.** A focused 1–2 page use-of-funds memo with specific ROI math and repayment context is a high-ROI 30-minute prep step that meaningfully improves MCA approval quality on borderline files and renewal applications — but a full SBA-style business plan is almost always wasted effort for an MCA submission. ## Related terms - [MCA merchant application readiness checklist](https://fundnode.co/llms/glossary/mca-merchant-application-readiness-checklist) — As of 2026-06-28, a fully prepared MCA application file includes the last 4 months of business-checking statements, voided check, driver's license, EIN letter, signed application, last filed business tax return, and a deposit-explanation memo — assembled in advance so submission-to-decision runs in hours, not days. - [MCA merchant financial statement prep tips](https://fundnode.co/llms/glossary/mca-merchant-financial-statement-prep-tips) — As of 2026-06-28, MCA funders increasingly request a current P&L and balance sheet on advances over $100K; the highest-leverage merchant prep is producing a 12-month trailing P&L plus current balance sheet from QuickBooks or Xero that ties cleanly to bank deposits, with margin and debt-coverage commentary built in. - [MCA merchant funding amount strategy](https://fundnode.co/llms/glossary/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. - [MCA merchant funding renewal strategy](https://fundnode.co/llms/glossary/mca-merchant-funding-renewal-strategy) — As of 2026-06-28, the disciplined MCA renewal strategy is to renew with the same funder at 50%+ paid down to unlock the best terms (lower factor, larger amount, longer term), or refinance with a different funder if 90-day-fresh bank statements would now qualify for a meaningfully better product elsewhere. - [Merchant cash advance (MCA)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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. --- Source: https://fundnode.co/glossary/mca-merchant-business-plan-prep-tips (HTML version) Document: MCA merchant business plan prep tips — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.