IRR, DPI, and TVPI for MCA funds — the merchant's translation guide.

The 60-second answer

MCA funds report performance to LPs using three private-fund metrics. They aren't equivalent — each captures a different dimension of return:

• IRR (Internal Rate of Return). The annualized, time-weighted return on invested capital. Sensitive to how fast cash comes back, not just how much.
• DPI (Distributions to Paid-In). A simple multiple of cash returned to LPs versus cash they put in. 1.0x means LPs have been paid back their original capital.
• TVPI (Total Value to Paid-In). DPI plus the remaining unrealized value in the portfolio. The full picture of what LPs are eventually expected to receive.

A merchant who knows which metric is currently driving the GP's behavior can predict the shape of pricing, terms, and renewal offers. Let's walk through each.

IRR — the annualized rate

IRR is the discount rate at which the net present value of fund cash flows equals zero. That's the textbook definition. The practical version: IRR is what an LP would have earned if they had put their money in a perfect annuity producing exactly the fund's actual cash-flow pattern.

MCAs amortize daily through ACH, so cash starts flowing back to the fund within weeks of each origination. That fast amortization makes MCA fund IRRs look mechanically high versus PE benchmarks. A gross IRR of 22% is normal in MCA; the equivalent PE fund would be exceptional.

Gross versus net IRR

Gross IRR is the portfolio return before fund fees, carry, and management costs. Net IRR is what LPs actually take home. The spread between them is roughly 5–8 percentage points, driven by:

• 2% annual management fee.
• 20% carried interest on profits above the hurdle.
• Fund operating expenses (audit, legal, admin).

What IRR pressure does to your factor rate

A fund running below target IRR pressures the GP to extract more yield from each origination. That shows up as tighter underwriting on borderline files (because losses drag IRR) and slightly higher factor rates on competitive files. A fund running above target IRR has room to give back basis points to win business.

DPI — the realized-cash multiple

DPI answers: "Of every dollar an LP put in, how many dollars have actually been wired back?" It's a simple ratio: distributions paid divided by paid-in capital.

A DPI of 0.4x means LPs have received back 40 cents on every dollar contributed so far. A DPI of 1.0x means full capital return. A DPI of 1.4x means LPs have received their capital back plus 40% in cash profit.

The typical DPI curve in MCA

• End of year 1: 0.1x – 0.2x
• End of year 2: 0.4x – 0.6x
• End of year 3: 0.8x – 1.0x
• End of year 4: 1.1x – 1.3x
• End of year 5: 1.3x – 1.5x
• End of year 6–7: 1.4x – 1.7x (terminal)

MCA DPI curves are much faster than PE because the underlying assets self-amortize. By year 4 most funds have fully returned LP capital and are distributing profit. This is one of the structural attractions of MCA as an asset class for institutional allocators — quick capital return relative to traditional private credit.

What DPI pressure does to your factor rate

A fund behind on its DPI curve will harvest aggressively. That means:

• Preference for shorter-paper deals (6-9 months) that produce DPI faster.
• Aggressive renewal pricing on existing strong merchants — high-confidence cash flow.
• Tighter pricing on new merchants who would lock capital in for 12-15 months.

TVPI — the full picture

TVPI captures both what LPs have actually received (DPI) and what's still expected to be received (the residual value, often called RVPI). TVPI = DPI + RVPI.

For a midlife MCA fund (year 3-4), TVPI might be 1.5x, decomposed as DPI 0.9x + RVPI 0.6x. That tells LPs that 60% of expected total return has been realized in cash and another 40% is still held as residual portfolio value to be harvested over the next 2-3 years.

Why the DPI-to-TVPI gap matters

A wide gap (e.g., DPI 0.4x, TVPI 1.6x) means the fund is "marked" high but hasn't proven it through realized cash. LPs are skeptical of unrealized marks because portfolio values can erode quickly if defaults rise. A fund with a wide gap is under pressure to convert mark to cash — which translates into harvest behavior.

A narrow gap (e.g., DPI 1.4x, TVPI 1.6x) means the fund has already proven most of its return in cash. The remaining 0.2x is gravy. This fund has less harvest pressure and can price new originations more aggressively if it chooses to.

How the three metrics conflict

The three metrics regularly point in different directions. Common patterns:

• High IRR, low DPI, high TVPI. Strong on-paper performance, but cash hasn't materialized yet. LPs are demanding distributions. Expect harvest behavior: short paper, aggressive renewals.
• Low IRR, high DPI, moderate TVPI. Capital has been returned but growth has stalled. The GP is pressured to redeploy into higher-yielding originations — aggressive pricing on new merchants in growth verticals.
• Moderate IRR, low DPI, low TVPI. The fund is in trouble. LPs are demanding answers. The GP is likely to either tighten dramatically (defensive) or stretch for yield (offensive). Either way, merchants get a worse deal.
• High IRR, high DPI, high TVPI. The fund is winning on all three. Maximum flexibility to price competitively. These are the funders who can give back basis points to win your business — but they're also rarer.

How LPs use these metrics to decide on the next vintage

When the GP raises a successor fund, prospective LPs look at:

• IRR vs. benchmark. Did this fund beat the peer-group MCA fund median?
• DPI realization pace. Did cash come back as scheduled?
• TVPI vs. PME. Did the fund outperform a passive public-market equivalent?

A GP raising fund III while fund II is showing weak DPI faces a harder fundraise. That fundraising pressure leaks into operating decisions — including how the GP prices and underwrites new deals during the raise. Sometimes more aggressive (to show momentum), sometimes more conservative (to keep loss numbers clean).

What you can do with this

• Ask the broker which fund vintage the GP is currently raising. If they're raising fund III on the back of fund II's track record, fund II's behavior is being optimized for headline metrics.
• Ask whether the current quote is being written off the active fund or a warehouse-only vehicle. A warehouse-only writeup signals fund capacity is constrained and pricing has less negotiation room.
• Ask about renewal economics versus new-merchant economics. If renewals are dramatically better-priced than new deals, the fund is in DPI-harvest mode and treating new merchants as filler.