Credit policy is the documented rule set that defines a funder's appetite, risk tolerance, and pricing structure. It is the most important governance document at any MCA funder.
The structure of a typical 2026 credit policy.
A credit policy document at a top-tier MCA funder typically runs 30–80 pages and covers:
- Eligibility criteria (knockouts).
- Paper-grade definitions and pricing matrix.
- Maximum advance amounts by tier.
- Industry inclusion / exclusion lists.
- Stacking policy.
- Personal guarantor requirements.
- Documentation requirements.
- Approval authority limits.
- Exception policy.
- Renewal eligibility criteria.
- Concentration limits.
- Compliance and regulatory framework.
Typical eligibility minimums (2026).
- Time in business: 6 months minimum at most funders; 12 months at top-tier; 24 months for A-paper.
- Monthly deposits: $15K minimum (raised from $10K in 2024 due to default-rate pressure); $25K for A-paper.
- Personal credit score: 500 minimum; 580 for B-paper; 650 for A-paper.
- NSF count last 90 days: Maximum 5 at most funders; 3 for A-paper.
- Negative day count: Maximum 10 days in last 90.
- Bankruptcy: None open; 12+ months since discharge for consideration.
- Existing MCA stack: None active at most funders; some allow 1 existing position.
- Tax liens: None active (some funders allow on payment plan).
- Business legal entity: LLC, S-Corp, C-Corp, sole proprietorship with EIN.
Paper-grade pricing matrix (typical).
- A-paper: 650+ FICO, $25K+/mo deposits, 18+ months operating, no NSFs, no stacks → factor 1.18–1.28.
- B-paper: 580–649 FICO, $15K+/mo deposits, 12+ months operating, ≤3 NSFs → factor 1.28–1.36.
- C-paper: 540–579 FICO, $12K+/mo deposits, 9+ months operating, ≤5 NSFs → factor 1.36–1.42.
- D-paper: 500–539 FICO, $10K+/mo deposits, 6+ months operating, ≤8 NSFs → factor 1.42–1.50.
Industry inclusion / exclusion in 2026.
Standard inclusions: restaurants, retail, professional services, auto repair, construction (with caveats), trucking (specialty funders), healthcare, beauty/wellness, e-commerce, manufacturing, wholesale.
Standard exclusions: - Cannabis (in non-licensed states). - Firearms / ammunition. - Adult entertainment. - Gambling (non-licensed). - Cryptocurrency / digital assets. - Multi-level marketing. - Debt-collection agencies. - Bail bonds. - Subprime auto sales. - Pawnshops.
Caveat industries (some funders include, some exclude, often higher pricing): - Long-haul trucking (specialty funders only). - Full-service restaurants with bar revenue >40%. - Construction with seasonal revenue patterns. - Hospitality (hotels, motels).
Stacking policy.
Most top-tier funders in 2026 enforce strict no-stacking policies:
- No existing MCA positions at time of funding.
- 30-day blackout between paying off prior MCA and new advance (some funders).
- Renewal-only relaxation — funders allow merchant to "renew up" into a larger advance even with outstanding balance.
- Subordination requirement — if existing position is from same funder or sister entity.
D-paper specialists explicitly allow 2nd and 3rd position; pricing reflects.
Personal guarantor requirements.
- Standard: Personal guarantee from any owner with 20%+ equity stake.
- A-paper exceptions: Some A-paper deals waive PG for established corporations with strong balance sheet.
- High-risk PG: Required documentation includes credit pull, employment verification, asset disclosure.
- COJ (Confession of Judgment): Required at many funders for advances >$100K; banned in some states.
Approval authority limits.
- Auto-approval: Sub-$50K, A/B-paper, clean file (no human review).
- Underwriter approval: $50K–$250K, all paper grades.
- Senior underwriter: $250K–$500K.
- VP underwriting: $500K–$1M.
- Credit committee: $1M+.
Renewal eligibility.
- 50%+ paid down on existing advance.
- No payment defaults in last 60 days.
- No reconciliation requests outstanding.
- Deposit volume stable or growing.
- No new MCA stacks taken since original advance.
Concentration limits in credit policy.
- Single industry: max 20% of portfolio.
- Single state: max 25% of portfolio.
- Single ISO: max 10% of monthly origination.
- Single merchant: max 2% of outstanding book.
2026 trends in credit policy.
- Tighter minimum deposit requirements ($15K → likely $20K by late 2026).
- AI-driven explainable decline codes to satisfy CA, NY, UT, VA, GA disclosure requirements.
- Industry-specific sub-policies (trucking, restaurant, retail each have distinct tightening).
- Macroeconomic overlay — temporary deposit-volume bumps during recession concerns.
- Climate-risk overlays for hurricane / wildfire / flood-zone merchants.
Common confusions.
First, "credit policy = risk-pricing model." Related but distinct — policy defines eligibility; model defines pricing.
Second, "credit policy is public." Almost never — proprietary; competitive intelligence value.
Third, "all funders use the same minimums." False — varies significantly across the 100+ active MCA funders.
Fourth, "policy is fixed." False — typically updated quarterly; major changes annually.
Fifth, "exceptions are common." Less so in 2026 — exception rate at top-tier funders typically <5% of decisions.
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 funder stacking policy: strict vs. permissive — Strict-stacking-policy MCA funders (Credibly, CAN Capital, Forward Financing, Rapid Finance) require no existing positions and price 1.18–1.36; permissive-stacking funders (D-paper specialists) allow 2nd-4th positions at 1.40–1.55 factor with daily-debit stacking.
- MCA funder risk-pricing model (2026) — MCA funder risk-pricing models in 2026 use 8–15 inputs (credit score, deposit volume, NSF count, time-in-business, industry, geography, stacking history, cash-flow stability) feeding a logistic-regression or gradient-boosted-tree default predictor that maps to factor rates from 1.15 to 1.50.
- MCA funder decisioning engine (typical) — Typical MCA funder decisioning engine in 2026 is a rules-plus-ML pipeline: hard knockouts (credit, deposit minimums, industry exclusions), then risk-pricing model, then human underwriter review for edge cases — producing decisions in 5 minutes to 4 hours.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-funder-credit-policy-typical-2026.