What are MCA credit policy tiers?

MCA funders sort every approved deal into an internal credit tier — typically labeled A, B, C, and sometimes D paper. Each tier corresponds to a different risk profile, pricing band, advance limit, and term length. A paper is the cleanest, highest-quality deal a funder writes. C and D paper are higher risk and price accordingly, often with shorter terms and stricter reconciliation rules.

What's the typical factor rate for each tier in 2026?

Rough 2026 bands: A paper 1.18-1.26 over 12-18 months, B paper 1.27-1.36 over 9-12 months, C paper 1.37-1.48 over 6-9 months, D paper 1.49+ over 4-6 months. These shift quarterly with capital cost and competitive pressure, and they vary 4-6 cents between funders within the same tier. The headline factor is only one variable — term length, daily ACH, and fees move just as much per tier.

What determines my tier?

Five primary inputs: (1) personal FICO of the principal — A paper usually needs 680+; (2) months in business — A usually needs 36+; (3) average monthly revenue — A usually $30K+; (4) bank statement quality (NSF count, daily balance trends, deposit consistency); (5) industry. Some industries (legal cannabis, adult entertainment, gun retail, certain trucking sub-segments) are tier-capped regardless of the other inputs.

Can I move up a tier?

Yes. Three things move merchants up over 6-12 months: pay down or pay off existing MCAs (drops daily ACH burden), maintain 90 days of zero NSFs (single biggest tier driver), and grow average daily balance to $5K+. A merchant who methodically does all three for two consecutive quarters often moves from B to A — which can mean 8-12 cents off their factor on their next deal.

Do all funders use the same tier definitions?

No. The labels (A/B/C/D) are industry shorthand, but each funder has their own thresholds. Funder X's A paper might be funder Y's B paper. That's why the same merchant gets meaningfully different offers from different funders — they're being scored against different cutoffs. The merchants who get the best pricing match their profile to the funder whose A-paper definition fits them most easily.

MCA funder credit policy tiers — the merchant's guide to A, B, C, and D paper

Every MCA funder sorts deals into internal credit tiers. The tier you land in drives your factor rate, advance amount, and term — often more than your industry. Here's exactly what each tier means in 2026 and how merchants move up.

The 60-second answer

When a funder underwrites your MCA application, they don't just decide yes or no. They place you into an internal credit tier — usually labeled A, B, C, and sometimes D paper. That tier determines almost every economic variable of your offer: factor rate, advance size, term length, daily ACH, reconciliation policy, and which fees get waived.

The same merchant can be A paper at one funder and C paper at another, because the tier cutoffs are funder-specific. The merchants who consistently get the best pricing are the ones who understand where they fall and which funder's tier definitions favor their profile.

What each tier actually looks like

A paper: the merchants funders chase

A-paper merchants are the easiest defaults to prevent and the most profitable to renew. Funders compete for them — A-paper deals get same-day decisions, the lowest factor rates, longest terms, and the most discretion on reconciliation.

Typical A-paper profile in 2026:

FICO 680+ on the personal guarantor
36+ months in business
$30K+ average monthly revenue
$5K+ average daily balance
Zero NSFs in 90 days
No existing MCA on the books
Industry not on a sensitive list (no cannabis, adult, firearms retail)
Statement deposits show 15+ unique customers per month (low concentration)

Typical A-paper pricing:

Factor: 1.18-1.26
Term: 12-18 months
Frequency: daily or weekly ACH (your choice on weekly at most A-tier funders)
Advance: 1.0-1.5x average monthly revenue
Origination fee: 0-2%
Reconciliation: discretionary, 24-48 hour turn

B paper: the broad middle

The majority of funded merchants land in B paper. Solid businesses with a few softening variables — maybe FICO under 680, maybe 18-36 months in business, maybe a couple of NSFs in the lookback. Still bankable, but funders price for the residual risk.

Typical B-paper profile:

FICO 600-680
18-36 months in business
$15K-$30K average monthly revenue
$1.5K-$5K average daily balance
1-3 NSFs in 90 days
Possibly one existing MCA, paid down 50%+
Industry acceptable to most funders

Typical B-paper pricing:

Factor: 1.27-1.36
Term: 9-12 months
Frequency: daily ACH
Advance: 0.7-1.0x average monthly revenue
Origination fee: 2-4%
Reconciliation: case-by-case, 48-72 hour turn

C paper: the high-volume, high-touch tier

C-paper merchants are the bread and butter of the MCA industry. Real risk, real margin. Funders price aggressively, shorten terms, and watch performance closely.

Typical C-paper profile:

FICO 540-600
12-18 months in business
$10K-$15K average monthly revenue
Below $1.5K average daily balance
3-6 NSFs in 90 days
One existing MCA in early stages, or recently paid off
Industry sometimes on caution lists (auto, certain trucking, used car sales)

Typical C-paper pricing:

Factor: 1.37-1.48
Term: 6-9 months
Frequency: daily ACH
Advance: 0.5-0.8x average monthly revenue
Origination fee: 4-6%
Reconciliation: rare, strict criteria

D paper: the high-risk lender market

A smaller set of funders specialize in D paper — merchants who can't get funded by the mainstream MCA market. Pricing is brutal, terms are short, and recovery posture is aggressive. D paper is sometimes the right product for a specific bridge (one-off equipment need, immediate payroll gap, opportunity that can't wait), but it's rarely the right product for ongoing capital.

Typical D-paper profile:

FICO under 540, or no FICO
6-12 months in business
Under $10K average monthly revenue
6+ NSFs in 90 days
Multiple existing MCAs (stacking)
Industry sometimes on restricted lists

Typical D-paper pricing:

Factor: 1.49+ (often 1.55-1.70)
Term: 4-6 months
Frequency: daily ACH, sometimes 2x daily
Advance: 0.3-0.5x average monthly revenue
Origination fee: 6-10%
Reconciliation: typically not offered
COJ filed in states that allow it

The five primary tier inputs

Most funders use the same five inputs, weighted slightly differently:

1. Personal FICO

The single biggest tier-driver at most funders. 680+ usually opens A-paper doors; below 580 closes most B-paper doors. The personal credit score signals discipline, obligation management, and recovery capacity to the funder's algorithm.

2. Time in business

Months in business correlates strongly with default risk. Year-one businesses default at 2-3x the rate of year-three businesses. Funders use TIB as both a tier input and a minimum cutoff (most won't touch under 6 months; many require 12+).

3. Average monthly revenue

Drives advance size (typical max is 0.5-1.5x monthly revenue depending on tier) and also feeds the tier algorithm. Higher revenue isn't always better-tier — a $200K/month business with thin margins can be B paper, while a $30K/month business with clean books can be A paper.

4. Bank statement quality

NSF count, average daily balance, deposit consistency, payroll regularity, lowest-day balance — the metrics from the parser stack we covered in our bank-statement-software article. This is the layer where merchants have the most short-term control: 90 days of disciplined cash management can move you up a tier.

5. Industry

Some industries get tier-capped regardless of the other inputs. Cannabis (even legal), adult entertainment, firearms retail, certain trucking sub-segments (long-haul one-truck operations), and some health services hit hard caps at B or C paper. Industry isn't always public information — funders maintain internal "do not fund" and "cap at tier X" lists that aren't disclosed.

The hidden tier inputs

Beyond the five primary inputs, several less-obvious variables shift tier placement:

Customer concentration. A business with 60% of revenue from one customer is treated as B paper even if everything else screams A.
Deposit cadence. Daily merchant processor deposits (restaurants, retail) score higher than monthly contract payments (B2B services) at the same revenue level.
Existing debt service ratio. If your existing MCA, equipment, and term-loan payments already consume more than 12% of monthly revenue, you'll get shifted down a tier regardless of other factors.
Tax compliance. Visible IRS payments, state tax payments, and payroll tax patterns boost tier. Absence of tax payments (especially payroll tax) signals risk.
UCC filings. Existing UCC-1 filings against your business limit collateral position and shift you down a tier. Funders check public UCC databases on every deal.
Public records. Civil lawsuits, judgments, liens, and bankruptcy history affect tier even if not surfaced in credit. Funders run separate public-record searches.

How merchants move up tiers

Tier improvement is real but takes 6-12 months. Here's the playbook:

Months 0-3: stop the bleeding

Zero NSFs from this point forward — set up overdraft protection if needed
Maintain $5K+ daily balance — keep a reserve account untouched
Pay all payroll tax deposits on schedule
If you have an existing MCA, run it to payoff before applying for new capital

Months 3-6: rebuild the profile

Consolidate revenue into one operating account — eliminate inter-account transfers
Add 2-3 trade lines that report to D&B (vendor accounts, business credit card)
File any delinquent state filings, settle any small civil judgments
Pull your personal credit and fix anything obvious — disputed items, paid collections marked open, etc.

Months 6-12: prove the new normal

Continue the discipline — funders look at 90-180 day windows, so consistency wins
Grow revenue measurably — even 10% growth quarter-over-quarter helps
Apply to funders whose A-paper definitions match your profile, not whoever your broker pushes

A merchant who methodically executes this from B paper to A paper typically sees factor rates drop 8-12 cents on their next deal — on a $50K advance, that's $4K-$6K of fees saved.

The most common tier mistakes merchants make

Trusting a broker's tier assessment. Brokers earn the most commission on C-paper deals (because the spread is widest). They have a structural reason to place you in C paper even if you'd grade as B at a different funder.
Applying when you have a fresh NSF. An NSF in the last 30 days almost guarantees a tier drop. Wait 30-45 days, then apply.
Submitting only one bank statement. Funders see incomplete cash picture and assume the worst. Submit all business accounts.
Not knowing your industry's tier ceiling. If you're in a tier-capped industry, you'll never get A paper — knowing that up front saves you from wasting time applying to funders who'll auto-decline.
Ignoring renewal-tier improvements. Your second deal with a funder often gets an automatic tier bump based on payment performance. Asking for the renewal-tier pricing is worth doing every time.

The takeaway

MCA pricing isn't industry-wide — it's tier-specific, and your tier varies by funder. The merchants who consistently get good terms know exactly where they fall, which funders' tier cutoffs work in their favor, and how to keep the bank statement window clean enough that the algorithm grades them up rather than down.

Frequently asked questions

What are MCA credit policy tiers?: MCA funders sort every approved deal into an internal credit tier — typically labeled A, B, C, and sometimes D paper. Each tier corresponds to a different risk profile, pricing band, advance limit, and term length. A paper is the cleanest, highest-quality deal a funder writes. C and D paper are higher risk and price accordingly, often with shorter terms and stricter reconciliation rules.
What's the typical factor rate for each tier in 2026?: Rough 2026 bands: A paper 1.18-1.26 over 12-18 months, B paper 1.27-1.36 over 9-12 months, C paper 1.37-1.48 over 6-9 months, D paper 1.49+ over 4-6 months. These shift quarterly with capital cost and competitive pressure, and they vary 4-6 cents between funders within the same tier. The headline factor is only one variable — term length, daily ACH, and fees move just as much per tier.
What determines my tier?: Five primary inputs: (1) personal FICO of the principal — A paper usually needs 680+; (2) months in business — A usually needs 36+; (3) average monthly revenue — A usually $30K+; (4) bank statement quality (NSF count, daily balance trends, deposit consistency); (5) industry. Some industries (legal cannabis, adult entertainment, gun retail, certain trucking sub-segments) are tier-capped regardless of the other inputs.
Can I move up a tier?: Yes. Three things move merchants up over 6-12 months: pay down or pay off existing MCAs (drops daily ACH burden), maintain 90 days of zero NSFs (single biggest tier driver), and grow average daily balance to $5K+. A merchant who methodically does all three for two consecutive quarters often moves from B to A — which can mean 8-12 cents off their factor on their next deal.
Do all funders use the same tier definitions?: No. The labels (A/B/C/D) are industry shorthand, but each funder has their own thresholds. Funder X's A paper might be funder Y's B paper. That's why the same merchant gets meaningfully different offers from different funders — they're being scored against different cutoffs. The merchants who get the best pricing match their profile to the funder whose A-paper definition fits them most easily.