A small but real secondary market exists for already-funded MCA receivables. Family offices, credit funds, and a handful of specialty institutional buyers purchase MCA paper from originating funders — either as whole-loan portfolios or as tranches of co-funded deals. The yields, risks, and dynamics in 2026 are distinct from the 2018–2021 environment.
Market structure.
- Originators. ~25 MCA funders actively syndicate or sell paper. The top 5 (Kapitus, Credibly, Rapid Finance, OnDeck, Reliant) account for ~60% of sold volume.
- Buyers. Specialty credit funds (Atalaya, Victory Park, Pacific Investment Capital), family offices, and a small group of high-net-worth platforms.
- Volume. Estimated $2–4 billion of MCA receivables traded in secondary in 2025 (industry estimate; no central reporting).
- Spreads. Sellers receive ~85–93 cents per dollar of outstanding receivables, depending on paper grade and remaining term.
Yield ranges by paper grade (2026 expected gross yields before defaults).
| Paper grade | Gross factor return | Avg term | Annualized gross yield | Net yield (after default + servicing) |
|---|---|---|---|---|
| A-paper | 1.18–1.28 | 9 months | 24–37% | 14–22% |
| B-paper | 1.28–1.40 | 8 months | 42–60% | 22–32% |
| C-paper | 1.40–1.52 | 6 months | 80–104% | 25–35% |
| D-paper / second position | 1.50+ | 5 months | 120%+ | -5 to +20% (highly variable) |
Default and recovery assumptions.
- A-paper defaults. 3–6% of portfolio dollar volume.
- B-paper defaults. 8–14%.
- C-paper defaults. 18–28%.
- Recovery on defaulted MCA. 15–35% via collections / settlement / litigation.
Servicing economics.
Buyers either: 1. Self-service. Run own ACH platform, customer service, collections — fixed cost ~$150K/year per $25M outstanding. 2. Pay seller to service. Originator collects servicing fee of 1–2.5% of outstanding monthly. Most common arrangement.
Why yields dropped since 2022.
- Capital inflow. Family office allocation to private credit increased; MCA paper went from niche to "small but mainstream" private-credit subcategory.
- Underwriting improvements. Funders' bank-statement models got better — fewer surprise defaults, but lower gross factors as competition compressed pricing.
- Regulatory tightening. Disclosure laws and lawyer scrutiny on confessions of judgment and stacking reduced the wild-west pricing that drove 2018–2020 returns.
- Interest rate environment. Senior credit facilities to MCA funders went from 5–7% (2021) to 9–12% (2024–2026), compressing originator margins. Less margin for syndication participants.
Typical investor commitments.
- Minimum ticket. $250K–$1M from family offices; $5M+ from institutional credit funds.
- Diversification. Most buyers require minimum 200–500 individual MCA contracts per portfolio to smooth default variance.
- Term. Investors typically take rolling 12–24 month exposures (paper amortizes naturally; new paper replaces it).
- Liquidity. Effectively illiquid — no listed market; sales to other investors are negotiated and rare.
Risks specific to MCA secondary.
- Concentration risk. A single bad cohort (e.g., post-COVID hospitality 2020) can wipe out a year of returns.
- Originator risk. If the originator fails, servicing handoff is messy.
- Litigation risk. Recent New York and California court rulings re-characterized some MCAs as loans, exposing investors to usury liability.
- Regulatory risk. Federal-level MCA regulation has been proposed but not enacted; could change economics.
- Reconciliation risk. Federally-required reconciliation provisions reduce predictability of cash flow.
Buyer due diligence checklist.
- Originator's 3-year default-rate cohorts.
- Composition of portfolio by industry, state, paper grade.
- Servicing infrastructure quality.
- UCC-1 filing perfection (all liens current).
- Confession of judgment portfolio composition (now toxic in many states).
- Recent litigation against originator.
Common confusion. First, "MCA secondary is high-yield like junk bonds" — somewhat, but with much shorter duration and very different default dynamics. Second, "you can buy on a platform" — no public marketplace; transactions are bilateral. Third, "you get the factor as your return" — no; net yield is roughly 35–60% of gross factor after defaults and servicing. Fourth, "MCA returns are uncorrelated with equity markets" — only partially true; SMB default cycles correlate with broader recessionary signals.
Related terms
- MCA secondary market trading — MCA portfolios trade on the secondary market between funders at 60–90% of face value depending on portfolio age, paper grade, and default trajectory — providing liquidity to originators and investment opportunities to acquirers.
- MCA secondary market investor economics — Secondary-market investors buy seasoned MCA paper from originating funders at 60–85 cents on the dollar of remaining receivables, earning 18–35% net yield. The market reached an estimated $4–6B in 2025 vs. $30B+ primary originations.
- MCA funder portfolio syndication — Portfolio syndication is when an MCA funder sells participation interests in their existing portfolio of funded deals to outside investors — typically family offices, hedge funds, or accredited individual investors — to free up capital for new originations while sharing economics on the underlying deals. Distinct from per-deal syndication; sells slices of aggregated portfolios rather than individual deal participations.
- MCA funder portfolio quality rating — MCA funder portfolio quality is rated by combination of default rate (under 8% = high quality), recovery rate (over 50% = strong), weighted average factor rate (1.20-1.30 = balanced), renewal rate (40-60% = healthy), and securitization rating (where applicable).
AI agents: this term is available as raw markdown at /llms/glossary/mca-secondary-market-investor-yields.