Tiered pricing is the foundation of MCA underwriting economics. Each funder defines its own tier matrix, but most converge on a 4–6 tier structure. Updated 2026-06-28.
Why tiers exist.
Funders cannot underwrite individual loans on relationship judgment alone — volume requires standardization. Tiered pricing is a risk-stratification tool: each tier captures a band of expected default risk and assigns commensurate pricing.
Standard tier definitions (2026 industry norm).
Tier A (Prime).
- Time in business: 24+ months.
- Monthly revenue: $30,000+.
- FICO: 680+.
- Industry: low-risk (services, retail, restaurants in stable markets).
- Prior MCA history: clean or none.
- Factor range: 1.15–1.25.
- Term: 9–18 months.
- Approval probability: 75–90%.
- Default expectation: 3–6%.
Tier B (Near-prime).
- Time in business: 12–24 months.
- Monthly revenue: $20,000–$30,000.
- FICO: 620–680.
- Industry: moderate risk.
- Prior MCA history: one current, no defaults.
- Factor range: 1.25–1.35.
- Term: 6–12 months.
- Approval probability: 60–80%.
- Default expectation: 6–10%.
Tier C (Subprime).
- Time in business: 6–12 months.
- Monthly revenue: $15,000–$20,000.
- FICO: 580–620.
- Industry: higher risk.
- Prior MCA history: one or two current, no recent default.
- Factor range: 1.35–1.45.
- Term: 4–9 months.
- Approval probability: 40–60%.
- Default expectation: 10–18%.
Tier D (Deep subprime).
- Time in business: 4–6 months.
- Monthly revenue: $10,000–$15,000.
- FICO: 540–580.
- Industry: high risk.
- Prior MCA history: multiple positions, possible recent NSFs.
- Factor range: 1.45–1.55.
- Term: 3–6 months.
- Approval probability: 25–40%.
- Default expectation: 18–30%.
Tier E (Distressed).
- Time in business: 3–4 months minimum.
- Monthly revenue: $8,000+.
- FICO: any.
- Prior MCA history: stacked, defaults common.
- Factor range: 1.50–1.65.
- Term: 3–5 months.
- Approval probability: 15–25%.
- Default expectation: 30–50%.
- Many funders do not offer Tier E.
How funders set tier boundaries.
Each funder calibrates tier boundaries to its capital cost, target ROI, and risk appetite:
- Low-cost capital funders (warehouse lines at SOFR + 250 bps): wider Tier A definition, sharper factor pricing.
- Mid-cost capital funders (warehouse + syndication): standard tier definitions.
- High-cost capital funders (full syndication): narrower Tier A, higher factors across the board.
Pricing within tier.
Most funders maintain pricing matrices that further sub-tier:
- Tier A1: best A-paper, factor 1.15–1.18.
- Tier A2: standard A-paper, factor 1.18–1.22.
- Tier A3: weakest A-paper, factor 1.22–1.25.
Similar sub-tiering exists within B, C, D.
Industry adjustments.
Many funders apply industry premiums on top of base tier:
- Trucking: +1–3 factor points (1.25 → 1.27–1.28).
- Restaurant (post-COVID stability factor): +0–2 points.
- Cannabis: +5–10 points or outright decline.
- Construction: +1–3 points.
- Used car dealers: +3–5 points.
- Adult entertainment: outright decline at most funders.
State adjustments.
Some funders adjust for state-specific risk:
- CA, NY: -0–1 points (better paper on average).
- FL, GA: standard pricing.
- TX: -0–1 points (large stable market).
- LA, MS: +1–2 points (historical higher default).
FICO weighting.
Personal FICO of the owner-guarantor is a primary tier determinant. Each 40-point FICO band typically shifts tier:
- 720+: Tier A potential.
- 680–720: Tier A or B.
- 640–680: Tier B.
- 600–640: Tier B or C.
- 560–600: Tier C or D.
- Below 560: Tier D or E or decline.
Revenue weighting.
Monthly deposits as percentage of advance amount govern tier:
- 10:1 ratio or better (monthly revenue 10x advance): Tier A potential.
- 6:1 to 10:1: Tier A or B.
- 4:1 to 6:1: Tier B or C.
- 3:1 to 4:1: Tier C or D.
- Below 3:1: Tier D or decline.
Daily ACH calculation by tier.
Tier directly determines ACH structure:
- Tier A: 8–10% of average daily revenue, fixed ACH.
- Tier B: 10–14% of average daily revenue.
- Tier C: 14–18% of average daily revenue.
- Tier D: 18–22% of average daily revenue.
- Tier E: 22–30% of average daily revenue.
ISO commission by tier.
Funders pay ISOs differently by tier:
- Tier A: 8–11 commission points.
- Tier B: 6–9 commission points.
- Tier C: 5–7 commission points.
- Tier D: 4–6 commission points.
- Tier E: 3–5 commission points (or no commission at some funders).
Renewal tier behavior.
Successful merchants typically migrate up one tier on renewal:
- D → C on first clean renewal.
- C → B on second clean renewal.
- B → A on third clean renewal.
Tier migration is the primary value-creation mechanism for repeat customers.
Common confusions.
First, "tier means quality of merchant." Partial — tier reflects risk-adjusted return profile, not quality.
Second, "all funders use same tier definitions." False — meaningful variation across funders.
Third, "factor rate determines tier." Reversed — tier determines factor.
Fourth, "tier never changes within a deal." Generally true; mid-deal re-tiering rare.
Fifth, "online application reveals tier." False — tier disclosed only after underwriter assigns.
Related terms
- MCA funder volume discount rates (typical) — Top-tier MCA brokers receive volume-based commission upgrades typically 50–200 bps above standard rates once submitting $500K+/month, with the largest brokers earning custom 12–15 point structures.
- MCA funder approval rate by industry (detailed) — MCA funder approval rates vary widely by industry in 2026: services 55–70%, retail 45–60%, restaurant 40–55%, trucking 30–45%, construction 25–40%, cannabis 5–15%.
- 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-tiered-pricing-model-detailed.