B paper is the largest single underwriting tier by deal volume in the MCA industry — roughly 30%–40% of all funded files. It represents merchants who are still creditworthy but visibly stressed: lower personal FICO, shorter operating history, more NSF activity, or one closed-out MCA in their recent past. Pricing widens materially compared to A and A+, but approval rates remain high.
The qualifying criteria (2026 standard).
- Personal FICO: 600–659.
- Business FICO / PayNet: 50–65 percentile, periodic late-pay acceptable.
- Time in business: 12–18 months.
- Average monthly revenue: $15K–$25K deposits.
- Average daily balance: $1K–$3K positive; occasional negative-balance days tolerated.
- NSFs: 3–5 in last 90 days, ≤10 in last 12 months.
- UCC filings: Zero open MCA UCCs; one closed UCC in last 24 months acceptable.
- Existing MCA position: None, or one paid down to ≤70% balance.
- Public records: No active large judgments, no current tax liens over $10K, no bankruptcy in 3 years.
The pricing tier.
- Factor rate: 1.30–1.40.
- APR-equivalent: 75%–120%.
- Holdback / specified percentage: 10%–15% of daily deposits.
- Term length: 3–6 months.
- Advance size: $10K–$150K.
- ISO commission: 6%–10% of funded amount.
- Funding speed: 24–72 hours from accepted offer.
The funders who compete for B paper.
B paper is the workhorse tier for the mid-tier and balance-sheet funder community: Fora Financial, Mulligan Funding, Channel Partners Capital, BFS Capital, Pearl Capital, LG Funding, Lendr.online, Quikstone Capital, plus the B-paper desks at Credibly, Rapid, and Kapitus. Many funders specifically target B paper because pricing margin is wider and competition is less aggressive than A paper.
The underwriting workflow.
B paper requires more manual underwriting than A. Bank statements get auto-analyzed by Heron/Ocrolus, but underwriters often review NSF clusters, deposit-source quality (are deposits from a single concentrated customer?), and industry vertical specifics. Approval typically takes 4–24 hours of human review on top of automated decisioning.
Worked example.
Restaurant owner: 640 FICO, 14 months in business, $19K/month average deposits, 4 NSFs in 90 days, one closed MCA from 8 months ago. Two funders bid:
- Funder X: $25K at 1.35 factor, 5-month term, 12% holdback, 8% ISO commission.
- Funder Y: $20K at 1.32 factor, 6-month term, 11% holdback, 7% ISO commission.
The merchant typically picks based on cash-flow comfort (lower holdback) more than total cost. B-paper merchants are often cash-stressed and prioritize keeping daily debits manageable.
The default mechanics.
B-paper default rates run 8%–15%, materially higher than A. Funders compensate via higher pricing and shorter terms. Default scenarios typically involve: NSF cluster within first 30 days post-funding (early default), stacking with a new funder mid-term, or seasonal revenue collapse for vertical-exposed businesses.
The renewal economics.
B paper has a meaningful renewal funnel — about 50%–60% renew within 90 days of payoff. Merchants who renew B paper successfully often graduate to A or even A+ over 2–3 funding cycles as time-in-business builds and credit improves. ISOs build long-term relationships with these merchants and earn multiple commissions across years.
The ISO economics.
- Commission rates 6%–10%; absolute dollar commission lower than A but still meaningful.
- B-paper merchants are less price-sensitive than A merchants — they're focused on getting approved, not on extracting the best rate.
- ISO competitive advantage in B paper comes from speed and approval reliability, not commission rate.
Common confusions.
First, "B paper is risky paper." Partially true — default rates are higher than A, but B paper is the volume tier of the industry and not pathological.
Second, "B paper merchants can't qualify anywhere else." Partially true — most B paper merchants don't qualify for bank LOC or SBA financing, which is why MCA wins.
Third, "B paper pricing is predatory." Debatable — high APR-equivalent (75%–120%) is unavoidable when default rates run 8%–15% and capital costs run 10%+ for funders; the pricing reflects real risk.
Fourth, "B paper merchants are likely to default." False — 85%–92% of B paper repays successfully; the tier is creditworthy on average.
Fifth, "B paper deals don't renew." False — renewal rate is 50%–60%; significantly above zero.
The strategic takeaway.
B paper is where mid-tier MCA funders make their margin. ISOs who specialize in B paper develop deep relationships with these funders and learn to package files for fast approval — knowing which funders accept which industry verticals, which tolerate higher NSF counts, and which offer the best ISO commission for the deal type.
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 funder paper grade A (detailed) — A paper in MCA underwriting describes the strong 15–25% of funded merchants: 660–699 personal FICO, 18–24 months in business, $25K–$50K average monthly revenue, ≤2 NSFs in 90 days, no open MCA UCCs — pricing at factor 1.22–1.30 with 4–9 month terms and routine renewal eligibility.
- MCA funder paper grade C (detailed) — C paper in MCA underwriting describes the stressed 20–30% of funded merchants: 550–599 personal FICO, 6–12 months in business, $7K–$15K average monthly revenue, 5–10 NSFs in 90 days, one open MCA position — pricing at factor 1.40–1.50 with 2–4 month terms and limited renewal eligibility.
- 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.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-funder-paper-grade-B-detailed.