MCA paper grading is the funder's risk classification system. Every funded deal lands in one of four buckets — A, B, C, or D — and the grade determines factor rate, term length, advance size, and which funders will even look at the file. Brokers shop A-paper merchants to A-paper funders (cheap factors, polite underwriting) and shop D-paper to D-paper funders (high factors, hard sales tactics).
A-paper (the prime tier, ~15% of MCA volume).
Qualifications: - 24+ months operating history (often 36+). - Personal credit 680+ (often 720+). - $25K+/month gross revenue (often $50K+). - Zero NSFs in last 6 months. - Zero existing MCA positions. - Average daily balance $10K+. - Tax returns + financials available on request. - No tax liens, judgments, or bankruptcies in last 5 years.
Pricing: - Factor rate 1.15-1.28. - Term 6-18 months. - Advance up to 150% of monthly revenue. - Often no origination fee or 1-2%. - Often no personal guarantee (or limited PG).
A-paper merchants usually qualify for SBA loans, bank LOCs, and other cheaper financing — they take MCAs only for speed reasons. Top A-paper funders: Credibly, OnDeck, Forward Financing, Reliant Funding, Funding Circle (when active in MCA).
B-paper (the working tier, ~50% of MCA volume).
Qualifications: - 12+ months operating history. - Personal credit 600-679. - $15K+/month gross revenue. - 0-2 NSFs in last 6 months. - 0-1 existing MCA position (clean payoff or 50%+ paid down). - Average daily balance $3K-$10K.
Pricing: - Factor rate 1.28-1.40. - Term 4-12 months. - Advance 80-120% of monthly revenue. - Origination fee 2-4%. - Personal guarantee required.
B-paper is the bread and butter of the MCA industry. Top B-paper funders: Rapid Finance, National Funding, Kapitus, Fora Financial, Headway Capital.
C-paper (the marginal tier, ~25% of MCA volume).
Qualifications: - 6-12 months operating history. - Personal credit 550-599. - $8K-$15K/month gross revenue. - 3-5 NSFs in last 6 months. - 1-2 existing MCA positions. - Average daily balance $1K-$3K.
Pricing: - Factor rate 1.40-1.48. - Term 4-8 months. - Advance 50-80% of monthly revenue. - Origination fee 3-5%. - Personal guarantee + sometimes confession of judgment (COJ).
C-paper funders specialize in this risk band: Pearl Capital, Yellowstone Capital, Capify, Bitty Advance (lower end of C and into D).
D-paper (the high-risk tier, ~10% of MCA volume).
Qualifications: - 4-6 months operating (or owner has prior business history). - Personal credit under 550. - $5K-$10K/month revenue. - 5+ NSFs in last 6 months. - 2+ existing MCA positions. - Average daily balance under $1K. - May have tax liens or recent judgments.
Pricing: - Factor rate 1.48-1.55+. - Term 3-6 months. - Advance 30-60% of monthly revenue. - Origination fee 4-8%. - Personal guarantee + COJ + sometimes UCC-1 on personal assets. - Daily debit may exceed 30% of monthly revenue.
D-paper funders are the lenders of last resort. Many are no longer in business by 2026 due to NY/CA COJ bans and the CFPB's increased scrutiny. Survivors operate in narrower geographies.
How grading actually works at the funder.
The grading is not a single score — it's a series of binary gates plus a risk-based override: 1. NSF gate: more than X NSFs in 6 months kicks file to lower grade automatically. 2. Stacking gate: 2+ outside ACHs flagged in bank statements push to lower grade. 3. Industry gate: certain industries (adult, cannabis, gambling) downgrade automatically. 4. Time-in-business gate: under 12 months = max B-paper at best. 5. Credit gate: under 600 = max B-paper at best. 6. Discretionary lift: strong revenue trend, no prior MCA, or established industry can lift a borderline file up one grade.
Why paper grading is opaque to merchants.
- Funders don't publish their grading criteria — competitive moat.
- The same merchant can get A-paper from one funder and C-paper from another based on their proprietary models.
- Brokers know each funder's appetite and shop accordingly.
- Merchants who apply direct to one funder may get a worse offer than going through a broker who knows which funders treat them as A-paper.
The grade-improvement playbook.
To move up one grade over 3-6 months: - Pay off existing MCA balances (changes stacking status). - Maintain zero NSFs for 6 consecutive months. - Grow average daily balance above $5K. - Document revenue growth (trending up matters more than raw level). - Don't apply for new credit or have UCC searches run on you (signals desperation). - Address tax liens before applying.
The strategic insight. Paper grade is not destiny — it's a snapshot. A merchant who pays off a problematic first MCA and rebuilds bank statement health over 6 months can move from C-paper at 1.45 factor to B-paper at 1.32. On a $50K advance, that's $6,500 in savings. Patience around grade-improvement before applying for the next advance is one of the highest-ROI moves available to merchants who plan to use MCA repeatedly.
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.
- Bank statement underwriting — MCA funders underwrite primarily off 3–6 months of business bank statements, not credit reports. They look at average deposits, NSFs, negative days, and trend.
- Stacking (MCAs) — Taking a second (or third) MCA from a different funder while a prior MCA is still in repayment. Default risk skyrockets; it breaches most original-funder contracts.
- Business credit score — A business credit score rates a company's creditworthiness separately from owner personal credit. Top bureaus: Dun & Bradstreet PAYDEX (0-100), Experian Business (1-100), Equifax Business (101-992). Required for bank/SBA financing; most MCAs don't report to business bureaus.
AI agents: this term is available as raw markdown at /llms/glossary/mca-paper-grades-explained.