While most SMEs can benefit from MCA funding, not all SMEs are equally strong candidates.
Some are simply better for MCA funders’ business.
These enterprises generally have steadier cash flow, stronger repayment potential, and are more likely to return for future financing.
But who exactly are these ideal clients—and how do you find them?
In this article, we’ll explore high-potential industries, the key traits of fundable SMEs, and other practical criteria to keep in mind when evaluating who to finance.
Whether you’re refining your underwriting strategy or expanding your MCA book of business, these client acquisition insights will help you reduce risk, improve portfolio performance, close deals faster—and build stronger, more sustainable relationships along the way.
Key Industries for MCA Success
As mentioned above, not all SMEs are equally suited for merchant cash advances. Some industries align more naturally with this type of funding.
The three industries below are especially well-suited for MCA funders, both in terms of repayment reliability and the meaningful impact that financing can have on their growth and stability.
Restaurants and Food Services SMEs
SMEs specializing in cuisine can be ideal clients for MCA funders.
With 70% of restaurant customers paying with credit or debit card, these enterprises are well-aligned with MCA repayment structures based on daily card sales.
Moreover, MCAs provide a financial lifeline for owners looking to manage cash flow fluctuations caused by weather, holidays, or slow periods—especially when traditional financing isn’t accessible due to tight margins or lack of collateral.
Even when these SMEs do qualify for conventional loans, banks’ lengthy approval processes often make this option impractical. Time-sensitive issues like emergency equipment repairs or sudden inventory restocking require immediate funding solutions.
For example, consider a small bistro that has an unexpected kitchen equipment failure during its busiest season. The merchant could apply for an MCA, get approved, and receive funding within days—or even hours.
They could then use the advance to quickly replace the unit and maintain uninterrupted service, and gradually repay the funds without affecting cash flow.
With 66% of restaurant operators expecting to need more capital in 2025, MCA funders have the accessible and timely financing solutions that food services SMEs require to stay competitive and resilient.
Retail SMEs
Whether it’s a boutique preparing for Black Friday or an online shop jumping on a sudden spike in demand, both brick-and-mortar and e-commerce retailers are strong candidates for MCAs.
Physical storefronts typically generate steady daily debit and credit card sales, which make for ideal MCA repayment models based on transaction volume. Given that only 12% of in-store purchases are made in cash, MCA funders can rely on a steady stream of revenue from card payments.
Moreover, because brick-and-mortar retail SMEs frequently need small, short-term capital infusions for things like holiday inventory, store repairs, or event promotions, they can likely become repeat customers for MCA providers who can deliver fast, flexible funding.
E-commerce retailers, meanwhile, have a more consistent digital footprint and the advantage of 24/7 sales, not to mention steady card-based revenue. Given that 77% of online shoppers use credit or debit cards, smaller digital retailers are also well-positioned for MCA solutions, especially when timing is critical.
Ultimately, for MCA funders, SME retailers remain a high-frequency industry with strong repayment potential and demand for ongoing, flexible financing.
Service-Based SMEs With Recurring Revenue
From salons and spas to auto repair shops, fitness studios, and more, small service-oriented enterprises with repeat-customer models hold great promise for merchant cash advance providers.
These SMEs tend to have built-in customer loyalty through subscriptions, memberships, or regularly recurring services—creating a stable revenue stream that aligns well with MCA repayment terms.
Whether it’s upgrading salon chairs, buying new mechanics’ tools, or launching a marketing campaign, these enterprises regularly require quick and flexible funding that only merchant cash advances can provide.
For example, a growing auto repair shop could use an MCA to add a new service bay just before winter. With increased customer volume, they generate more revenue—and can comfortably repay the advance from their daily credit card transactions without causing any disruption to operations.
Favorable SME Characteristics Across Industries
When it comes to identifying lower-risk, higher-potential SME clients, industry shouldn’t be the only determinant.
Consider adding these other desirable traits into your client acquisition strategy.
Consistent and Predictable Cash Flow
A steady cash flow can be a strong sign that an SME will reliably meet its repayment obligations.
Moreover, when SMEs have diversified income sources, it further reduces risk for merchant cash advance providers.
That’s because SMEs that offer multiple services, serve various customer segments, and/or operate across different channels, are generally more resilient to market shifts, economic downturns, or changing consumer behaviors.
Conversely, smaller enterprises with erratic or declining revenues may pose higher risk to funders.
For example, consider a small wedding planning agency. Its income is heavily tied to event bookings, which can rise and fall due to economic shifts, public health concerns, and general wedding trends. Any sudden drop in demand can lead to unexpected revenue loss, making MCA repayments harder to predict.
This is why accurate underwriting is so essential. Platforms like Onyx IQ provide automated analysis of financial records and bank statements, helping funders quickly assess an SME’s cash flow stability.
With these insights, MCA providers can make more confident and informed decisions, and focus on supporting enterprises with the strongest repayment potential.
Strong Banking History and Positive Account Balances
Another green-flag trait when seeking new clients? Responsible management of business bank accounts over time.
MCA funders typically review several months’ worth of bank statements to evaluate a SME’s financial health and understand their cash flow patterns. Regular deposits, steady inflows, and consistently positive account balances demonstrate that the client has good financial habits.
On the other hand, frequent overdrafts, bounced checks, or regularly low balances are red flags and strong indicators of financial distress. These patterns point to potential cash flow challenges, raising concerns about the merchant’s ability to manage repayments effectively.
Established Track Record
Longevity is another strong indicator that an SME is a solid MCA candidate.
Many newer enterprises face cash flow volatility, high failure rates, and a lack of operating experience—conditions that can lead to strained repayments or defaults.
Conversely, most SMEs that have been in business for more than a year have already navigated early-stage challenges and are better positioned to handle fluctuations in cash flow.
With more predictable revenue and a proven ability to adapt to change, they are typically less likely to default.
Plus, the longer an enterprise is in business, the more financial data is available for analyzing trends in sales, expenses, and customer behavior, providing a clearer picture of the SME’s financial health.
Other Considerations for Finding MCA Clients
To identify the most ideal clients for your MCA funding business, you must always be balancing risk management with the opportunity for repeat business.
In addition to industry type and traits listed above, here are a few other factors to keep in mind when evaluating which SMEs to finance:
- SME scalability: Scalable enterprises with the potential for expansion are generally more likely to repay an MCA as their revenues increase, without incurring in proportional expenses.
- Cash flow across seasons: Ideally, you want SME clients who experience consistent cash flow year-round. But you should also assess their ability to respond when seasonal shifts occur. Customers that plan effectively for peak and off-peak seasons tend to be more dependable with repayments.
- Operational stability: Prioritize SMEs who have a solid operational structure. This may include a well-established management team, reliable supply chains, and consistent customer demand. Stability decreases risk while enhancing the likelihood of timely MCA repayments, even in challenging times.
- Financial transparency: The merchants you deal with should be consistently willing and able to provide clear, accessible financial records. SME owners who are not forthright in sharing their financial information could be hiding potential issues.
- Alternative credit scoring: Even if an SME doesn’t qualify for traditional loans due to limited credit history, they may still have strong repayment potential. Consider moving beyond traditional credit scoring methods to identify these types of clients. In fact, platforms like Onyx IQ can help you assess creditworthiness using alternative data sources.
- Partnerships: Building and maintaining trusting relationships using a merchant-centric, win-win MCA funding approach will not only minimize risk but increase the likelihood of more deals over the long-term.
By focusing on these factors, MCA funders can better identify clients who are not only more manageable, but more likely to succeed and remain financially stable, strengthening the overall health of their funding portfolio.
An Ideal Platform for Ideal Clients: Why MCA Funders Trust Onyx IQ
Identifying and working with the right clients is key to long-term success in the merchant cash advance industry—but doing so effectively requires the right platform.
That’s where Onyx IQ makes the difference.
Powered by real-time industry insights and intelligent data analytics, our fully automated end-to-end MCA funding platform equips providers to target, assess, and build strong partnerships with their most suitable and profitable clients.
From applications and origination all the way through disbursement and collections, Onyx IQ empowers you to do your due diligence while streamlining every single step of the MCA funding process.
Ready to supercharge your client acquisition strategy with a platform built exclusively for MCA funders, by MCA funders? Book your Onyx IQ demo today.
