The 60-second answer
MCA funders classify every deal into a paper grade — typically A, B, or C, sometimes with sub-grades like A+ or C-. Your paper grade is the funder's compressed read on the probability of full repayment, and it drives every economic variable on your contract: factor rate, term length, daily payment, fees, prepayment discount, and renewal terms.
The four variables that move you between tiers across virtually all funders:
- Personal FICO of the owner / primary guarantor
- Time in business (TIB)
- Monthly gross revenue, measured over 3 to 6 months of bank statements
- Stacking exposure — existing open MCAs that are still repaying
Beyond these four, funders apply industry overlays (some industries always price worse), state overlays (some states price slightly worse due to legal cost), and concentration adjustments. The tier is the headline; the overlays move you within it.
The standard three-tier model
A-paper — the lowest-priced tier
A-paper merchants are the lowest-risk, most-competed-for borrowers in the MCA market. Multiple funders will fight to win their business with the most aggressive pricing.
- FICO: 680 to 850 (some funders set the floor at 700)
- Time in business: 36+ months, often 60+
- Monthly revenue: $50,000 to $1M+, with consistent month-over-month
- Stacking: Zero open MCAs
- Bank statements: Positive average daily balance, no NSF activity, consistent deposit pattern
- Industry: Generally outside the high-risk exclusion list
Typical 2026 pricing: Factor 1.15 to 1.28, term 9 to 15 months, origination 1.5 to 3.0%, prepayment discounts 15 to 30% of remaining interest.
B-paper — the middle of the market
B-paper is where most MCA originations happen. The merchant has real revenue and a functioning business but does not quite hit A-paper thresholds — either because of FICO, shorter time in business, smaller revenue, or modest stacking exposure.
- FICO: 580 to 679
- Time in business: 12 to 35 months
- Monthly revenue: $15,000 to $49,999
- Stacking: 0 to 1 open MCA, with current obligations comfortably covered
- Bank statements: Mostly positive balance with occasional dips, infrequent NSF
Typical 2026 pricing: Factor 1.25 to 1.38, term 8 to 14 months, origination 2.5 to 4.0%, prepayment discounts 5 to 15%.
C-paper — the highest-priced tier
C-paper is the harder end of the market. Fewer funders will look at the file, the ones who do price aggressively, and the contract terms generally include stricter default mechanics.
- FICO: 500 to 579
- Time in business: 6 to 11 months
- Monthly revenue: $10,000 to $14,999
- Stacking: 1 to 2 open MCAs, often with thin coverage
- Bank statements: Frequent low balances, regular NSF, irregular deposits
Typical 2026 pricing: Factor 1.35 to 1.49, term 6 to 10 months, origination 4 to 6%, prepayment discounts rarely offered.
How tier translates to your real cost
The same $50,000 advance, three tiers
Same merchant funded amount, three different paper grades, three different costs.
- A-paper: 1.22 factor, 12 months, $61,000 payback, ~$242/day, APR-equivalent ~42%
- B-paper: 1.32 factor, 10 months, $66,000 payback, ~$314/day, APR-equivalent ~62%
- C-paper: 1.42 factor, 8 months, $71,000 payback, ~$423/day, APR-equivalent ~98%
The $10,000 gap between A-paper and C-paper on the same $50K advance is exactly why moving up a tier is worth real focus. On a 12-month basis, that is $833/month of cashflow that stays in your business instead of leaving as financing cost.
How to move up a tier
From C to B
- Cross 12 months in business. The TIB breakpoint at 12 months is the most universally observed in the industry. Wait if you can.
- Get FICO above 580. The 580 cutoff is widely used. Pay down personal revolving balances, ensure no late payments for 6 months, and avoid new credit inquiries.
- Clear existing MCAs. A single open MCA at low remaining balance is tolerable. Two or more, even small, is a C-paper signal.
- Stabilize bank statements. Three consecutive months without NSF activity moves a meaningful underwriting needle.
- Push monthly revenue above $15,000. Most funder B-paper revenue floors sit here.
From B to A
- Cross 24 or 36 months in business. The next breakpoints after 12.
- Get FICO above 680. Tighter discipline required — most A-paper programs floor here.
- Stay un-stacked for 6+ months. A clean repayment history of paying off an MCA without renewing into another one is a strong positive signal.
- Grow revenue past $50,000 monthly with consistency. Lumpy revenue even at high average will sometimes hold you in B-paper.
- Build a banking relationship. A long-standing primary bank relationship with average daily balances above $15K is often required for A-paper at many funders.
Why broker quotes vary so much
A common frustration: you talk to three brokers, get three different factor rate quotes for the same advance amount, and have no idea why. The tier model explains most of it:
- Different broker, different funder shop. Each broker submits to funders where they have a relationship. Funders price the same merchant differently.
- Different broker, different tier read. Some brokers package your file more strategically — including supplementary income documentation, addressing NSF episodes proactively, or explaining seasonality — which can push your file from C-paper to B-paper at the same funder.
- Different broker, different markup. The factor rate the funder quotes the broker may be 1.30; one broker passes through as 1.32 (small markup), another as 1.38 (heavy markup). Broker markup is the single biggest source of variance in quotes.
The best practice is to get the funder's wholesale rate disclosed separately from any broker markup. In CA, NY, CT, and VA this is increasingly required by law. In other states, you have to ask.
Industry and state overlays — the tier modifiers
Industry overlays that move you down a half-tier
- Restaurants and bars — heavier concentration risk, higher loss history. Most funders apply a 0.03 to 0.05 factor surcharge.
- Trucking / single-truck owner-operators — fuel cost volatility, broker payment delays, equipment risk.
- Construction — long payment cycles, supply cost volatility, weather exposure.
- Gas stations and convenience stores — fuel price compression, tobacco regulation exposure.
- Daycare and education — regulatory exposure, reputation risk.
Industries with positive overlays
- Medical and dental practices — stable receivables from insurance, high revenue, low default history.
- Established professional services — accounting, legal, IT services with recurring revenue.
- Auto repair shops — relatively stable revenue, manageable seasonal variance.
State overlays
- NY, CA, NJ, IL — modest negative overlay due to litigation cost and disclosure complexity (usually 0.02 to 0.04 factor surcharge)
- FL, TX, GA, NC, TN — neutral or slightly positive — lower legal cost, easier collections
What to ask before signing
- What paper grade did I price at? Most funders will not volunteer this, but most will answer if asked.
- What would I need to change to move up a tier? Get a specific answer — FICO target, TIB target, revenue target.
- What is the funder's wholesale factor versus the quoted factor? Reveals broker markup.
- Are there any industry or state overlays applied to my deal? Knowing whether you are paying a surcharge tells you whether to shop a competing funder that specializes in your industry.
- Is my renewal pricing tier-based or relationship-based? Relationship pricing on renewals is meaningful — typically 0.10 to 0.15 off the factor.
The bigger picture
Tiered pricing is how MCA funders manage adverse selection in a market where every merchant looks roughly similar from the outside. The structure is unavoidable — every asset-based finance product (credit cards, auto loans, mortgages) uses some form of risk tiering. What makes MCA different is the speed at which a merchant can move between tiers and the dollar magnitude of the savings on the way up.
For most merchants, the most valuable use of the 12 months between MCAs is not the revenue growth — it is the FICO clean-up, the stacking discipline, and the bank-statement consistency that pushes the next advance from C-paper to B-paper or B-paper to A-paper. That tier upgrade typically saves more than any incremental revenue growth would have earned.
Frequently asked questions
- What is MCA paper grade?
- Paper grade is how MCA funders classify the risk profile of a deal. A-paper is the lowest-risk, lowest-priced tier — typically merchants with 700+ FICO, 3+ years in business, $50K+ monthly revenue, and no stacking. C-paper is the highest-risk, highest-priced tier — sub-600 FICO, less than 12 months in business, lower revenue, or existing MCA exposure. B-paper sits between. Most funders publish 3 tiers; some have 4 or 5 with finer gradations.
- What factor rate should I expect at each tier in 2026?
- A-paper: 1.15 to 1.28. B-paper: 1.25 to 1.38. C-paper: 1.35 to 1.49. These are 2026 ranges across the top 50 funders. Within each tier, term length and industry overlays move pricing 0.03 to 0.07 in either direction. A 9-month A-paper deal is priced higher than a 15-month A-paper deal at the same factor — because the APR-equivalent on the shorter term is materially higher.
- Can I move up a tier?
- Yes, with time and discipline. The fastest paths are: (1) season your business past the next time-in-business threshold (12, 24, 36 months are common breakpoints), (2) clean up your bank statements so daily balances stay positive and NSF activity drops to zero, (3) pay off existing MCAs and stay un-stacked for 6 months, (4) move from a personal FICO score below 580 to above 620 through standard credit-building. Most merchants who execute disciplined moves can climb a tier in 9 to 15 months.
- Why does the same funder quote me different rates than my friend?
- Because the same funder operates multiple tiers. You and your friend may both be customers of Funder X, but you are A-paper and your friend is B-paper. Same funder, same product, different pricing. This is also why broker quotes can vary wildly for the same merchant — different brokers may have submitted your file to different tiers within the same funder.
- Do all funders use the same paper grade definitions?
- No. The thresholds vary significantly. One funder's A-paper might be another's high-end B. Each funder has its own underwriting model, FICO floors, time-in-business breakpoints, and industry overlays. The general A/B/C concept is industry-wide, but the specific cutoffs are funder-specific.
- What happens if I am between tiers?
- Most funders will price you at the higher tier (more expensive) when you are borderline. Some will offer a one-tier upgrade in exchange for a specific concession — a slightly shorter term, a higher daily payment, or a personal-guarantee modification. If you are within 20 points of FICO or 2 months of a time-in-business breakpoint, it is often worth waiting if you can.