What Is External Debt Detection?
External debt detection refers to scanning transactions for recurring debits tied to other funders or financial institutions. In MCA and small business lending, applicants sometimes take on several advances at once, known as “stacking.”
This creates a repayment burden that may exceed their actual cash flow.
This detection typically appears during bank statement scrubbing, when outgoing transactions are parsed and categorized. Operators use it to spot repayment patterns that indicate an applicant is already carrying external debt.
How Does External Debt Detection Work?
External debt detection works by reviewing withdrawals and recurring transactions.
- Transaction parsing: Outflows are extracted from bank statements and mapped.
- Pattern recognition: Recurring debits to known lenders or advance companies are identified.
- Context check: The size and frequency of repayments are compared against revenue to measure burden.
- Risk output: Submissions with heavy external debt loads are flagged as high risk.
In Heron, external debt detection is integrated into scrubbing.
- Automated parsing: Bank statements are ingested and transactions are analyzed line by line.
- Debt detection: Heron identifies repayment flows to outside lenders or MCA providers.
- Structured outputs: External debt obligations are logged as structured CRM fields, such as debt type, repayment frequency, and repayment amount.
- Next action: Submissions with stacking risk can be routed to exception queues, declined, or flagged for funder review.
This removes the need for underwriters to manually scan every transaction for hidden obligations.
Why Is External Debt Detection Important?
For brokers and funders, external debt detection is critical because stacked advances put repayment at risk. A business with multiple existing obligations may default quickly if additional funding is layered on top.
Heron makes this step consistent and scalable. Instead of relying on underwriters to notice repayment patterns, external debt is flagged automatically, reducing risk exposure while saving time.
Common Use Cases
External debt detection is applied across underwriting and policy screening.
- Identifying applicants making daily or weekly repayments to other MCA providers.
- Flagging stacked advances that exceed appetite thresholds.
- Writing debt repayment details into CRM fields for underwriter visibility.
- Screening out applicants with repayment loads that threaten sustainability.
- Escalating high-debt applicants for manual exception review.
FAQs About External Debt Detection
How does Heron detect external debt?
Heron parses bank statement transactions and flags recurring repayments to other funders or advance providers. These are written into the CRM for underwriters to review.
Why is external debt detection important for MCA brokers and funders?
It reveals stacking risk that could compromise repayment. By detecting these obligations early, funders avoid advancing capital to businesses already overleveraged.
What outputs should teams expect from external debt detection?
Teams receive structured CRM fields such as repayment frequency, total repayment amount, and debt type. These outputs make external debt visibility clear during underwriting.