Quick answer
Yes, you can get an MCA with an active tax lien, but the funder pool narrows and pricing worsens. Roughly 30-40% of MCA funders auto-decline open IRS or state liens. The rest require either an IRS-approved payment plan (Form 433-D installment agreement) or a lien-subordination workaround. Expect factor rates 0.05-0.15 higher than equivalent clean-lien deals.
Full answer
Why tax liens matter to MCA underwriting. A recorded federal tax lien (NFTL) or state tax lien attaches to all assets of the business, including future receivables. Since the MCA structure is technically a purchase of future receivables, the IRS/state lien creates a competing claim on the same revenue stream the funder is buying. If the taxing authority levies the bank account, the funder's daily ACH bounces and the deal goes into default. That priority risk is the real reason underwriters decline open liens — not moral judgment.
The 30-40% auto-decline tier. Several major funders have hard policies against any open federal tax lien regardless of size: most A-paper bank-adjacent products (Bluevine LOC, OnDeck term loan tier, Fundbox), most SBA-aligned products, and some B-paper funders that brand themselves as 'responsible' (Credibly's tightest products, Forward Financing on first deals). State liens get slightly more flexibility but still trigger declines at maybe 25% of funders. Don't waste application bandwidth on these — confirm policy first.
The 'payment plan accepted' tier. Roughly half the MCA market will fund a merchant with an open lien IF the merchant has an active IRS Installment Agreement (Form 433-D or 9465-approved) and can show 3-6 months of clean payment history on the plan. Funders that publish this policy or accept it informally: Greenbox Capital, Kapitus, Rapid Finance, Mulligan Funding, Headway Capital, Accord Business Funding, Newco Capital Group, Kalamata Capital. Documentation needed: copy of installment agreement, last 3 months of canceled payment proof, and most-recent IRS account transcript showing balance + current status.
The 'open lien OK' tier. A smaller subset of B/C-paper funders will fund over an active lien without requiring a payment plan, typically at materially worse pricing. This is the territory of high-cost funders charging 1.40-1.55 factor with shorter terms (3-6 months). The economics work for the funder because the higher pricing compensates for the elevated default risk. Merchants in this tier should expect daily remits to be sized aggressively because the funder is racing the IRS to the receivables.
Lien subordination — the rare clean fix. The IRS will issue a Certificate of Subordination (Form 14134) that subordinates the federal tax lien to a specific lender's interest in specific assets. This is the cleanest workaround but takes 30-45 days, requires showing the IRS that subordination accelerates collection of the back-tax debt (typically via the loan proceeds being earmarked for IRS payment), and isn't free (no IRS fee, but accountant + attorney prep often $1,500-$3,000). State equivalents vary by state. For deals over $100K, subordination is sometimes worth the wait. For sub-$50K deals, the timing usually kills the use case.
Pricing premium. Holding paper grade constant, a merchant with an open lien typically pays 0.05-0.15 higher factor than a clean-lien merchant. Example: clean-lien B-paper at 1.35 becomes open-lien B-paper at 1.40-1.50. Daily remit may also be sized higher (% of revenue or fixed daily amount) to compress timeline. Term lengths often shortened by 30-60 days. Total economic cost can be 15-30% higher than the clean-lien comparable.
What to prepare before applying. (1) IRS account transcripts (free at IRS.gov, Form 4506-T) showing all open liabilities and lien details. (2) Copy of Notice of Federal Tax Lien (NFTL) with recording info. (3) If on an installment agreement: copy of Form 433-D or 9465 approval letter + last 3 months of payment proof. (4) State lien records if applicable. (5) Written explanation of how the lien arose and the path to resolution. Funders evaluate the story, not just the number — a one-time payroll-tax timing issue reads very differently than chronic non-filing.
Red flag funders to avoid. Some predatory funders specifically target open-lien merchants because the merchant pool is desperate and shopping is limited. Watch-outs: factor rates over 1.55 on first deal, mandatory COJ (Confession of Judgment) in non-NY states, large 'origination fee' (over 4%), demand for additional UCC filings on personal assets, and any pressure to take more capital than requested. Open-lien doesn't mean you have to accept abuse — multiple legitimate funders compete in this space.
Strategy: resolve the lien while you fund. Best practice for merchants taking an MCA with an open lien is to earmark a portion of the proceeds for lien resolution (lump-sum payoff, Offer in Compromise down payment, or installment-plan setup). This shrinks the funder's risk on subsequent renewals and qualifies you for materially better pricing on deal 2. Funders track this pattern and reward it with factor reductions of 0.05-0.10 on renewals.
Bottom line: an open federal or state tax lien narrows the funder pool by roughly 30-40% and costs 0.05-0.15 in factor, but it is not a deal-killer. The most accessible path is an active IRS installment agreement with 3-6 months of clean payment history — that opens roughly half the market at near-standard pricing. For deals over $100K and a 30-45 day timeline, lien subordination is worth pursuing. Avoid any funder pushing terms outside the ranges described above.
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Methodology. Fundnode is an independent funding-platform that scores merchants against our 100-funder database. We earn referral fees from funders when merchants apply via Fundnode. Editorial rankings and answers are independent of fee structure. Updated 2026-06-25.