D-paper is the MCA credit tier that serves merchants with significant credit and bank-account issues but who still have demonstrable revenue. It sits between C-paper (workable) and E-paper (last resort) in the underwriting hierarchy. Updated for 2026.
The D-paper merchant profile.
A typical D-paper merchant has at least three of these characteristics:
- FICO 525–579. Below A/B/C-paper minimums (typically 600+ for B, 580+ for C).
- NSF count 5–7 in last 90 days. Above tolerances for A/B/C-paper underwriting.
- Negative-balance days 4–8 per month. Suggests cash-flow stress.
- Existing MCA in active repayment. Second-position or third-position scenarios.
- Industry restriction. Trucking (high cancellation rate), restaurant in distressed market, retail in declining vertical.
- Time-in-business 6–12 months. Below 12-month threshold most A-paper funders require.
- Recent tax lien or judgment. Under $25K, not yet paid.
D-paper funder profile.
D-paper is served by specialty subprime funders, not Tier 1 mainstream MCA funders. Top D-paper funders in 2026:
- Yellowstone Capital (post-restructure).
- GRP Funding.
- Mantis Funding.
- United Capital Source (UCS).
- Various small-portfolio ISO-owned funders ($10M–$50M AUM).
These funders use higher cost of capital (typically equity at 18–25% IRR or single-investor backing) and higher default tolerance (15–25% expected default rate vs. 6–10% for A-paper).
D-paper pricing structure.
- Factor rates: 1.42–1.55. A $50,000 D-paper advance costs $21,000–$27,500 in fees.
- Term: Typically 4–6 months. Short terms protect funders against borrower deterioration.
- Daily ACH: Roughly $200–$400/day on $50K advance ($75K–$77.5K total repayment over 5 months = $605–$610/day).
- Holdback: Often replaced with fixed daily debit (more predictable for funder).
- Origination fees: 2–5% deducted from advance amount.
- Prepayment: Typically minimum 80–100% factor honored even on early payoff (vs. 50–75% for A-paper).
Underwriting evidence required for D-paper.
D-paper underwriting is paradoxically more thorough than A-paper because of the elevated risk:
- Last 4 months bank statements (vs. 3 for A-paper).
- Voided check from primary operating account.
- Hard credit pull on personal guarantor.
- Background check (often) — bankruptcy and judgment search.
- Secretary of state lookup confirming entity active.
- Plaid/MX or Yodlee bank connection (mandatory at most D-paper funders).
- Recent merchant processor statements (where applicable).
- Landlord verification or facility lease.
Speed of D-paper funding.
D-paper deals fund slower than A-paper because of additional underwriting requirements:
- D-paper: 2–5 business days typical.
- A-paper: 4–24 hours typical.
Default and recovery on D-paper.
D-paper portfolios have expected default rates of 15–25% (vs. 6–10% for A-paper, 10–15% for B/C-paper). Recovery on D-paper defaults is typically 15–30% of remaining balance through:
- Confession of Judgment (COJ) enforcement in states allowing it (NY, several others until 2024 ban).
- UCC blanket lien enforcement on business assets.
- Personal guarantee enforcement.
- Collection agency placement at 25–40% of recovered amount.
The D-paper churn pattern.
D-paper merchants often "renew" MCA balances before paying off the original. A common pattern: merchant takes $30K MCA at 1.48 factor, after 60 days of payments has paid down to $25K balance, refinances with the same funder for $50K new advance — payoff $25K to funder, net new capital $13K to merchant (after origination fees and remaining factor difference). Cycle repeats every 60–90 days. After 12 months, merchant has paid roughly $48K in factor fees on $40K net new capital.
This is why ISO brokers and consumer advocates flag D-paper as the highest-friction tier — it can become a debt-cycle trap if not refinanced into longer-term capital (SBA, term loan, line of credit).
When D-paper makes sense.
- Bridge to confirmed exit event. Tax refund, real estate sale, customer payment.
- Emergency capital with high ROI. Equipment repair where downtime costs more than the MCA cost.
- Recovery scenario. Post-bankruptcy or post-judgment rebuild capital.
When D-paper does not make sense.
- Working capital with no exit. Cycle trap.
- Marketing spend or growth investment. Cost too high to produce positive ROI.
- Refinance of A/B/C-paper debt. Step backward in credit hierarchy.
Common confusion. First, "D-paper means subprime." Roughly correct but not all subprime is D-paper — E-paper exists below D. Second, "D-paper funders are predatory." Not categorically — many serve real merchant need with disclosed pricing. Third, "D-paper credit score equals personal FICO." False. D-paper underwriting weighs bank statement strength and revenue more heavily than personal FICO.
Related terms
- Paper grade (A/B/C/D) — MCA industry shorthand for merchant credit quality. A-paper qualifies for cheapest factor (1.15–1.28); D-paper is high-risk, factor 1.45+, often declined.
- MCA paper grades explained — MCA paper grades (A, B, C, D) rate merchant risk based on credit, time in business, revenue, NSFs, and prior MCA history. A-paper qualifies for cheapest factors (1.15-1.28); D-paper sees 1.45+ factors and short 4-6 month terms.
- MCA credit tier — E paper explained — E-paper is the deepest subprime MCA tier — sub-525 FICO, 8+ NSFs, recent bankruptcy or third-position debt; factor rates 1.55–1.80 with 3–5 month terms.
- Factor rate — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
- MCA renewal — Refinancing an existing MCA into a larger advance, typically pitched at 50% paid-down. Often masks worse pricing — the new factor is applied to a new principal that includes the old balance.
AI agents: this term is available as raw markdown at /llms/glossary/mca-credit-tier-d-paper-explained.