MCA funder portfolio aging curve explained — what merchants need to know.

The 60-second answer

A merchant cash advance has a near-zero default rate in its first 60 days, a steeply rising default rate between months 3 and 6, a peak around months 5–7, and a declining rate from month 8 onward. Plot that across a funder's whole book and you get the portfolio aging curve.

Funders manage their book to keep the curve smooth. When it's not smooth — when a big cohort of recent originations is about to hit peak-default month together — they tighten underwriting and uplift pricing on new deals. That's how a vintage-driven risk shock at a funder you've never heard of ends up costing you 0.04 on your factor rate.

What the curve actually looks like

Across hundreds of thousands of advances aggregated from industry-reported data and funder disclosures, the typical default-by-month-of-life curve looks roughly like this:

• Month 1: <0.5% cumulative default. The merchant just got the money — they're not going to default in week three.
• Month 2: ~1% cumulative. The first major reconciliation requests start.
• Month 3: 2–3% cumulative. First serious stress shows up — merchants who took the money for the wrong reason or stacked another deal.
• Month 4: 4–6% cumulative.
• Month 5 (peak entry): 7–9% cumulative.
• Month 6 (peak): 9–12% cumulative on B paper, 14–18% on C paper.
• Month 7: 11–14% cumulative.
• Month 8: 12–15% cumulative — slope starting to flatten.
• Months 9–12: Curve flattens. Most deals that were going to default already did. Survivors usually go to renewal.

Those numbers are paper-grade weighted. A pure A-paper book runs 3–5% lifetime. A pure C-paper book runs 18–24%. Most general-purpose funders blend to a 9–13% lifetime loss rate.

Why the curve has this shape

Three forces:

• Survivorship bias. The first month or two are clean because merchants haven't had time to fail yet — even ones who will. The curve rises as time exposes the weaker files.
• Cash buffer exhaustion. Most failing merchants have 60–120 days of runway. Around month 4–5 the buffer is gone and they go to stacking or default.
• Survivor selection. By month 7+, the merchants still paying daily ACH without issue are by definition the ones whose cash flow can support it. Default rate drops sharply.

How funders use the curve internally

Every funder's risk team runs a weekly vintage report. The report groups originations by month of funding (a "vintage") and tracks each vintage's default trajectory against the model curve. Three states a vintage can be in:

• On-curve. Vintage is performing in line with the model. No action.
• Outperforming. Vintage is defaulting less than the curve predicts. Often the funder loosens slightly — raises approval rate, lowers factor by 0.01–0.02 in the segment that drove the outperformance.
• Underperforming. Vintage is defaulting faster than the curve. Funder tightens — raises factor on new deals in the segment, shortens term, sometimes pauses originations in a vertical or state.

The merchant's factor rate today is downstream of the most recent underperforming vintage. That's why pricing can move 0.03–0.05 in a month with no public news.

Vintage shocks: what drives them

Recognizable vintages in the 2020–2026 window that funders still talk about:

• Q1 2020 vintage. COVID-era. Defaulted at 2.5–3x the model curve. Funders survived because federal stimulus rolled into merchant accounts and absorbed the shock by month 4.
• Q4 2022 vintage. First post-stimulus tightening. Funders had loosened in 2021–2022 chasing volume; this vintage defaulted 1.4–1.6x the model curve.
• Q2 2024 vintage. Trucking-heavy. The freight downturn pushed trucking defaults to 2x model. Funders with concentrated trucking exposure had to recap. Several cut originations in trucking entirely for 4–6 months.
• Q4 2025 vintage. Restaurant cost-of-goods shock from tariffs and labor cost. Restaurant defaults running 1.3–1.5x model. Still working through the curve into mid-2026.

When you see a funder suddenly tighten — bigger documentation packet, slower approval, higher minimum revenue — you're seeing the curve manifesting in their underwriting policy.

What this means for your renewal

Renewal economics live entirely inside the curve. By the time you're eligible for a renewal (usually 50–70% paid down on the original), you've cleared the peak-default window. The funder has high confidence you'll repay the second deal. That confidence shows up as:

• 0.04 to 0.08 lower factor than your first deal.
• 1.5x–2x the original advance size if the funder is comfortable.
• Looser documentation — sometimes just a fresh 3-month bank statement and a refresh of business identity docs.

That discount isn't loyalty — it's vintage math. You've earned a lower default probability by clearing the worst stretch of the curve.

The merchant's playbook

Five concrete moves:

• Time your renewal to month 7–10 of the original deal. That's the curve's safest window. Funders price most aggressively here.
• Avoid funders in a public tightening posture. If your broker says "X funder is being difficult right now," they're fighting a vintage shock — your file will get marked up to compensate.
• Watch funder origination volume. Funders that recently slashed origination by 30%+ are working through a bad vintage. Wait 60 days or apply elsewhere.
• Don't take a 4-month deal expecting to renew in month 3. You're still in the rising part of the curve. The funder won't renew aggressively that early.
• Recognize cohort discounts. A funder that just had a great vintage (low defaults in a recent cohort) often loosens for 60–90 days. That window is when new merchants get the best terms.

The honest caveat

Aging curves are an internal management tool. No funder publishes their current vintage performance. You see the output (your factor rate, approval probability, decision speed) but not the input. The point of understanding the curve isn't to game it — it's to know why two funders quote you wildly different numbers on the same file, and why timing your renewal by even 30 days can move your factor 0.02–0.04. Those gaps are real money, and they're driven by curve mechanics no one is going to explain to you on a sales call.