The MCA secondary market — where originating funders sell already-funded MCA contracts to outside investors — has matured into a real asset class. Understanding investor economics helps merchants and brokers see where the capital comes from.
Why originators sell.
- Capital recycling. Selling a $1M portfolio at 75 cents = $750K, redeployed into new originations at 25–40% target net yield. Holding the portfolio earns ~20–25% but ties up capital for 6–18 months.
- Risk transfer. Move concentration risk (e.g., a single $250K deal) off the books.
- Earnings smoothing. Booking a one-time gain on sale vs. recognizing income over 12 months.
- Liquidity. Funders backed by hedge funds or family offices face quarterly distribution requirements.
Who buys.
- Family offices. Long-duration capital, comfortable with 25%+ target yields on small-business credit.
- Specialty credit hedge funds. Run by alums of Marathon, Pine River, Apollo. Concentrated in NYC and South Florida.
- High-net-worth individuals. Often through aggregator platforms with $250K minimums.
- Private credit BDCs. A few publicly-traded BDCs (e.g., Hercules Capital, Trinity Capital) hold MCA receivables in their portfolios.
- Foreign capital. Israeli, Canadian, and Australian family offices have been active 2023–2026.
Pricing mechanics.
A typical secondary trade prices off three variables: 1. Remaining receivables. What is left to collect on the contract. 2. Days into contract. Performance through Day 60 reveals risk; later trades price higher (closer to par). 3. Industry / state / paper grade. Restaurants in NY trade weaker than HVAC in TX.
Typical 2026 pricing grid:
| Days into contract | Performance | Price (% of remaining) |
|---|---|---|
| 30 days | No defaults | 60–70% |
| 60 days | No defaults | 72–82% |
| 90 days | No defaults | 80–90% |
| Any | One missed payment | 50–65% |
| Any | Reconciliation in progress | 40–55% |
| Any | In default / litigation | 10–30% |
Investor net yield math.
Investor buys $100K of remaining receivables for $75K. Collects $90K (assumes 10% loss from defaults). Net profit: $15K on $75K invested over 6 months = ~40% annualized. After servicing fees (typically 1–3%), net yield is 35%+.
Servicing.
Originating funder typically continues to service (collect, manage reconciliations, handle defaults) for 1–3% of collections. Some buyers take on servicing themselves to control the merchant relationship.
Risks for investors.
- Collection deterioration. Original underwriting was on point-in-time bank statements; performance over 12 months may diverge.
- State law evolution. California / NY disclosure laws and emerging usury recharacterization risk make 2024+ vintages riskier than 2018 vintages.
- Originator bankruptcy. If the originating funder files Chapter 11, the chain of title to receivables becomes contested.
- Stacking deterioration. Merchants who took additional advances after secondary trade are higher default risk; secondary buyers often have no visibility.
Market size (2025 estimates).
Industry sources estimate $4–6B in annual secondary MCA trades, vs. $30–35B in primary originations. The ratio (~15%) is rising as more funders adopt capital-recycling models.
Common confusion. First, "secondary market" is sometimes confused with "buyer-of-deals" — these are different. Buyer-of-deals buys APPLICATIONS pre-funding; secondary market buys CONTRACTS post-funding. Second, secondary market is not securitized — these are bilateral trades, not bond issuances (though a few funders have explored MCA ABS deals). Third, merchants are usually unaware that their MCA contract has been sold; the servicing funder remains the merchant-facing party.
Related terms
- MCA buyer of deals — secondary market — The MCA secondary market is the network of investors and platforms buying MCA receivables from originating funders: individual deals, pool purchases, and portfolio acquisitions at 70–95 cents on the dollar depending on performance and remaining life.
- MCA buyer-of-deals vs. broker — A broker submits a merchant's application to multiple funders and earns commission on whoever funds. A buyer-of-deals purchases the full submission from the broker (typically $200–$2,000) and submits to their own funder network for their own commission.
- MCA funder private-equity backed — Many large MCA funders are owned by private equity firms, including Kapitus (Pine Brook Capital), Credibly (Flexpoint Ford), CAN Capital (Varadero Capital), and Rapid Finance (Rockbridge Growth Equity); PE backing typically drives capital availability, scale, and aggressive growth targets.
- MCA funder portfolio size — The total dollar value of active MCA advances on a funder's books; benchmarks: micro-funders <$10M, mid-market $10M–$250M, large $250M–$1B, mega-funders $1B+ (Credibly, Rapid Finance, Kapitus, Forward Financing each cross $1B as of 2026).
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-secondary-market-investor-economics.