Bank Statement Review: The 20 Point Method

Why we scrub

Underwriters do not read the merchant's application first. They read the bank statements. If our file says "70K a month" and the statements show 60K of real sales, the underwriter stops trusting everything else we sent. If we miss an existing advance, the funder finds it, and our desk looks careless or dishonest.

The scrub is how we make sure the file tells the truth before anyone else checks it. Every file gets a scrub sheet before submission. No exceptions.

The six lenses

The 20 points are grouped into six questions. Work them in order.

Lens	The question	Points
A. Integrity	Is this the real, complete file?	1 to 4
B. Revenue	How much real business money comes in?	5 to 9
C. Cushion	How much money stays in the account?	10 to 12
D. Stress	How often does the account run short?	13 to 15
E. Obligations	What does the business already owe, and how heavy is it?	16 to 18
F. Context	What else changes the picture?	19 to 20

The 20 points

A. Integrity

1. Name and account match. The account name matches the legal name or DBA on the application. The account number matches the voided check or bank letter. A personal account name on a "business" statement is a question to ask, not something to ignore.

2. Full set. Months are consecutive with no gap. Every page is present (check "page X of Y"). The month-to-date activity is included and recent.

3. Roll-forward. Each month's opening balance equals the previous month's closing balance. Pick one month and check the math: opening balance plus deposits minus withdrawals equals closing balance.

4. Format. Every statement is a bank-original PDF. Anything else (photo, screenshot, editable file, odd fonts) goes to the Fraud and Integrity Checks page before you continue.

B. Revenue

5. Gross deposits. Write the total deposits for each month, exactly as the bank shows them.

6. True revenue. Subtract every deposit that is not money from sales. Common non-revenue items:

• Transfers from the owner's other accounts or personal savings
• Owner cash injections
• Proceeds from advances or loans (often a large single credit with a funder name)
• Refunds and reversals
• Re-deposited items that bounced earlier
• Tax refunds
• Sale of equipment or vehicles
• Insurance payouts

True revenue is what funders size offers on. It is often 10% to 20% lower than gross deposits.

7. Deposit pattern. Count deposits each month. Many small and medium deposits look like real sales. A few large round deposits get a closer look and a question.

8. Trend. Compare the latest month to the average, and note the lowest month. Calculate the month-to-date pace: true deposits so far, divided by days covered, times 30. Many funders look closely at the lowest recent period, not only the average.

9. Source mix and concentration. Note how revenue arrives: card processor deposits, transfers from customers, cash, checks. If most sales are by card, compare processor deposits to the card processing statements. If one single customer is more than about 30% to 40% of deposits, flag it. A card processor is not one customer; it carries many customers' payments.

C. Cushion

10. Average daily balance (ADB). Many banks print it. If not, add up the ending balance of every day in the month and divide by the number of days.

Small example: a 3-day period ends at 2,000, then 500, then 3,500. ADB is (2,000 + 500 + 3,500) divided by 3, which is 2,000.

11. Ending balances and low points. Write each month's closing balance and its lowest daily balance. An account that ends most days near zero is tight even if deposits are strong.

12. Cushion ratio. Divide the ADB by the business's current daily-equivalent payments to existing positions. This shows how many days of payments the average balance could cover.

Narqix reading guide (internal, funders use their own limits):

Cushion ratio	Reading
15 or more	Comfortable
8 to 15	Tight
5 to 8	Thin
Under 5	High risk

D. Stress

13. NSFs and overdrafts. Count items returned for non-sufficient funds (NSF) and overdraft items per month. Zero is strong. Several in the last 90 days is a serious flag.

14. Negative days. Count the days each month that ended below zero.

15. Returns and stops. Note returned ACH debits, stop-payment orders and especially any returned payment to a funder. A returned funder payment can signal that the merchant is struggling or in dispute. Always flag it.

E. Obligations

16. Position map. List every existing advance or loan payment. For each, write: the name as shown on the statement, amount, frequency (daily or weekly), first date seen, last date seen, and whether it is still running. Each open advance is called a position (first position, second position and so on).

17. Hidden and new positions. Look for:

• Fixed, round-number daily or weekly debits with vague descriptions
• A large funding credit followed by a new series of fixed debits
• Payments that stopped suddenly (paid off, refinanced, or in dispute?)

Statements lag. An advance funded last week will not appear yet. Ask the merchant directly about every possible position and record the answer word for word.

18. Burden. Calculate two numbers for the latest full month:

• Holdback burden = total monthly payments to advances divided by monthly true revenue
• Total payment burden = all monthly debt payments (advances, loans, leases, tax payment plans) divided by monthly true revenue

Record both. You do not judge them. Funders set their own limits.

F. Context

19. Industry and seasonality. Note the industry, whether it is on any restricted list in the funder matrix, and whether the merchant described busy and slow seasons. Seasonal businesses are judged differently in their slow months.

20. Auto-stop flags. Check for and ask about: open bankruptcy, active tax liens, recent judgments, and any sign the merchant appears on an industry list of terminated merchant accounts. Any of these goes to the desk lead before anything else happens.

The 3-line summary

The top of every scrub sheet has exactly three lines:

1. Revenue: true revenue average, latest month, lowest month, month-to-date pace.
2. Cushion and stress: ADB, NSFs and negative days, returns.
3. Positions and burden: number of positions with amounts and frequency, holdback burden, total payment burden, and any gap between what the merchant told us and what we found.

Below the summary, list open questions for the underwriter.

Worked example

The merchant and the file

(MERCHANT NAME) owns a family restaurant, 6 years in business. She applied for a Merchant Cash Advance to renovate the dining room.

On the qualification call she said:

• About 70K a month in deposits
• 2 open advances: one daily, one weekly
• Credit around 640
• No bankruptcy, liens or judgments

The file has 4 full months of statements (Month 1 is the oldest, Month 4 the newest) plus 15 days of month-to-date activity, a voided check and her driver's license.

Step 1: Integrity (points 1 to 4)

• Account name matches the LLC name on the application. Account number matches the voided check.
• Months 1 to 4 are consecutive. All pages present. Month-to-date covers the 1st to the 15th.
• Roll-forward check on Month 4: opening balance 1,450 (matches Month 3's closing balance) plus deposits 64,900 minus withdrawals 60,750 equals closing balance 5,600. Correct.
• All files are bank-original PDFs with consistent fonts and layout.

Result: integrity passed.

Step 2: Revenue (points 5 to 9)

	Month 1	Month 2	Month 3	Month 4
Gross deposits	66,800	83,500	66,300	64,900
Owner transfers and injections	4,000	1,500	0	2,400
Advance proceeds	0	22,500	9,000	0
Re-deposited returned check	800	0	0	0
Tax refund	0	0	1,800	0
Total non-revenue	4,800	24,000	10,800	2,400
True revenue	62,000	59,500	55,500	62,500
Deposit count	142	138	131	147

• Average gross deposits: 281,500 divided by 4 is 70,375. This is the "about 70K" the merchant mentioned.
• Average true revenue: 239,500 divided by 4 is 59,875. Gross overstates real sales by about 10,500 a month.
• Latest month (62,500) is about 4% above the average. Lowest month is Month 3 (55,500).
• Month-to-date: true deposits of 29,400 over 15 days. Pace: 29,400 divided by 15, times 30, is about 58,800.
• Source mix: about 80% card processor deposits, the rest cash deposits. Month 4 processor deposits (50,100) are close to the processing statement's net total (50,640); the small gap is fees and timing. No single-customer concentration.

Notice what the advance proceeds tell us: a 22,500 credit in Month 2 and a 9,000 credit in Month 3. Each one is likely a new position. Step 5 checks.

Step 3: Cushion (points 10 to 12)

	Month 1	Month 2	Month 3	Month 4
Average daily balance	9,800	14,200	4,100	7,300
Closing balance	6,200	11,900	1,450	5,600

• 4-month ADB average: 35,400 divided by 4 is 8,850. But Month 2 is inflated by the 22,500 of advance proceeds sitting in the account. The last 2 months average 5,700, a fairer picture.

Cushion ratio uses the daily-equivalent payments from Step 5 (about 753 per business day):

• Month 4: 7,300 divided by 753 is about 9.7 (tight)
• Last 2 months: 5,700 divided by 753 is about 7.6 (thin)

Step 4: Stress (points 13 to 15)

	Month 1	Month 2	Month 3	Month 4	MTD
NSF items	0	0	3	1	0
Negative days	0	0	4	1	0

• 4 NSFs and 5 negative days, all in Months 3 and 4, the months after the second and third advances started.
• One of the Month 3 NSF items is a returned daily payment to Position A. Flag it.

Step 5: Obligations (points 16 to 18)

Position map

Position	Shown on statement as	Amount	Frequency	First seen	Status
A	Funder name, daily ACH	389	Every business day	Before Month 1	Running
B	Funder name, weekly ACH	1,250	Weekly	Month 2, after the 22,500 credit	Running
C	"ACH DEBIT WEB PMT" (vague)	750	Weekly	Month 3, after the 9,000 credit	Running

Other fixed obligation: equipment lease, 1,180 monthly, named lessor.

The merchant told us about 2 advances. The statements show 3. The Processor called her: "We see a weekly payment of 750 that started in Month 3. Can you tell me what that is?" She said: "Oh, that's a small advance I took online. I forgot about it." That answer is recorded word for word, and the summary shows the gap.

Month 4 payments (22 business days, 4 weekly debits):

• Position A: 389 x 22 = 8,558
• Position B: 1,250 x 4 = 5,000
• Position C: 750 x 4 = 3,000
• Total to advances: 16,558
• Plus the lease: 1,180. Total debt payments: 17,738

Burden (Month 4 true revenue 62,500):

• Holdback burden: 16,558 divided by 62,500 is about 26.5%
• Total payment burden: 17,738 divided by 62,500 is about 28.4%
• Daily-equivalent advance payments: 16,558 divided by 22 is about 753 per business day

Step 6: Context (points 19 and 20)

• Industry: restaurant. Not on the restricted list in the funder matrix. Merchant says winter is her slow season.
• Auto-stop flags: none seen on statements. Merchant self-reported no bankruptcy, liens or judgments.

The finished 3-line summary

1. Revenue: true revenue average 59,875 a month over 4 months (gross 70,375 includes 31,500 of advance proceeds plus owner transfers and refunds). Latest month 62,500, lowest Month 3 at 55,500, month-to-date pace about 58,800.
2. Cushion and stress: ADB 7,300 in Month 4, 5,700 average over the last 2 months. 4 NSFs and 5 negative days, all in Months 3 and 4, including 1 returned payment to Position A in Month 3. Months 1 and 2 clean.
3. Positions and burden: 3 active positions (A daily 389; B weekly 1,250 since Month 2; C weekly 750 since Month 3). Merchant disclosed 2 on the first call and confirmed C when asked. Holdback burden about 26.5%, total payment burden about 28.4%, cushion ratio about 9.7 in Month 4.

Open questions for the underwriter: none outstanding; Position C confirmed by merchant on follow-up call (date and time logged in the CRM).

What happens next: the desk lead reviews the file. With three positions, stress in recent months and a tight cushion, the lead may decide that a new advance is not the right path and route the merchant to an MCA Bailout conversation, or to a closer for an honest discussion. That decision is not yours. Your job was to make the facts clear.

Common scrub mistakes

• Using gross deposits as revenue
• Forgetting that advance proceeds inflate both deposits and ADB in the month they arrive
• Missing a position because its description is vague
• Counting a card processor as "one customer" concentration
• Skipping the month-to-date
• Writing "about 3 positions" instead of the exact amounts and dates
• Correcting the merchant's self-reported numbers in the CRM instead of recording both

Check yourself

1. Gross deposits are 50,000. The month includes a 10,000 advance credit and a 2,000 transfer from the owner's savings. What is true revenue?
2. A month has ending daily balances totalling 120,000 over 30 days. What is the ADB?
3. Month revenue is 40,000 and advance payments total 10,000. What is the holdback burden?
4. Why is the ADB in a month with advance proceeds misleading?
5. You find a weekly 500 debit with a vague description. The merchant said they have no advances. What do you do?

© Narqix Academy