The 60-second answer
When a broker or funder calls your deal "A paper," they mean a low-risk, prime-quality merchant. "B paper" is mid-risk. "C paper" is high-risk subprime. The grade determines:
- Factor rate range — A paper: 1.15–1.25 / B paper: 1.25–1.35 / C paper: 1.35–1.49
- Term length — A paper: 12–18 months / B paper: 9–12 months / C paper: 4–9 months
- Payment frequency — A paper often weekly or monthly ACH; B/C paper almost always daily
- Which funders will fund — A-paper funders (Rapid Finance, Credibly's prime tier, Fora Financial's top tier) won't touch C-paper deals at any price
Knowing your grade lets you check whether the offers you're getting match what the market should be giving you — and whether your broker is shopping you to the right funders.
A paper: the prime merchant
A-paper deals are the dream files. Funders compete hard for them.
Typical A-paper profile
- Monthly revenue: $30K+, consistent month over month
- Time in business: 3+ years
- FICO score: 680+
- Bank statements: 0–1 NSF in last 90 days, average daily balance equal to 2+ weeks of operating expenses
- Existing MCAs: none, or just paid one off cleanly
- Industry: not on standard exclusion lists (no cannabis, adult entertainment, etc.); restaurants and trucking can be A paper if the rest of the profile is clean
What A paper gets you
- Factor rates 1.15–1.25
- 12–18 month terms
- Weekly or monthly ACH options (not just daily)
- Reconciliation clauses that work (funder actually adjusts when revenue drops)
- Funding amounts up to 100–150% of monthly revenue
- Prepayment discounts often available
A-paper funders include Rapid Finance, Credibly (prime), Fora Financial (top tier), Mulligan Funding, Headway Capital, Reliant Funding. Bank-adjacent products from Bluevine, OnDeck, and Funding Circle also compete for A-paper merchants — and frequently win because they're not MCAs; they're term loans with much better APR.
B paper: the mid-market merchant
B paper is where most MCA deals actually sit.
Typical B-paper profile
- Monthly revenue: $15–30K
- Time in business: 1–3 years
- FICO score: 600–680
- Bank statements: 2–4 NSFs in last 90 days, modest average daily balance
- Existing MCAs: 0–1 open and current
- Industry: any not on exclusion list; cash-heavy industries (restaurants, salons, bars) often B paper even when revenue is strong
What B paper gets you
- Factor rates 1.25–1.35
- 9–12 month terms
- Daily ACH almost always required
- Reconciliation clauses present but slower to invoke
- Funding amounts 75–100% of monthly revenue
- Prepayment discounts available from some funders (Credibly, CFG, Fundbox)
B-paper funders include Kapitus, CFG Merchant Solutions, Forward Financing, Yellowstone Capital, Lendr, and most second-tier ISOs. This is the most competitive segment of the market and where shopping multiple funders pays off most.
C paper: the subprime merchant
C paper is high-risk in the funder's eyes. Pricing reflects it.
Typical C-paper profile
- Monthly revenue: $5–15K
- Time in business: 6–12 months
- FICO score: 500–600
- Bank statements: 5+ NSFs in last 90 days; low or negative average daily balance
- Existing MCAs: 1–2 open
- Industry: any, but elevated-risk industries (auto repair startups, certain construction trades) often default to C paper
What C paper gets you
- Factor rates 1.35–1.49
- 4–9 month terms (often 6 months)
- Daily ACH mandatory, with no reconciliation in many contracts
- Smaller funding amounts (50–75% of monthly revenue)
- Origination fees that A and B paper don't see (1–5%)
- Prepayment discounts rare
- Confession-of-judgment clauses more common (outside NY)
C-paper funders include LendingValley, Capytal, Pearl Capital, Total Merchant Resources, and a long tail of smaller funders. The economics here only work for the funder if enough merchants default — which is why the contracts tilt aggressively.
The four dimensions that determine your grade
1. Monthly revenue (weighted ~35%)
Higher revenue = better grade. But consistency matters more than peak. A business doing $20K/month every month grades better than one doing $40K one month and $5K the next. Underwriters look at the lowest three months of the trailing six, not the average.
2. Time in business (weighted ~25%)
The 12-month and 36-month thresholds are real cliffs. Going from 11 months to 13 months in business often shifts a deal from C to B paper. Going from 24 months to 36 months can shift B to A.
3. Bank statement health (weighted ~25%)
Underwriters look at three things in your last 3 months of statements: NSF count, average daily balance, and existing MCA debits. The single biggest controllable factor is NSF count. Going from 4 NSFs to 0 NSFs over 90 days often shifts you up a full grade.
4. FICO and personal credit (weighted ~15%)
FICO matters less for MCA than for any other business product — but it still moves the needle. The breakpoints are 600 (C→B paper transition), 680 (B→A paper transition), and 720 (best pricing from A-paper funders).
How to upgrade your paper grade in 90 days
- Eliminate NSFs. Single biggest move. Set up overdraft protection or a cash buffer; transfer auto-debits to a date 2–3 days after your biggest deposit.
- Raise average daily balance. Keep more cash on hand. Even an extra $5K average daily balance can shift the grade.
- Pay down or pay off existing MCAs cleanly. One closed MCA with clean repayment history is worth more than no MCA at all on the next application.
- Build personal credit. Pay down personal credit card utilization to under 10%. Add one positive trade line.
- Wait, if you can. Time in business and recent bank statements both improve simply by waiting 60–90 days while you fix the controllable items.
The broker incentive problem
Here's what most merchants don't know: brokers earn higher commissions on C-paper deals than on A-paper deals. A typical commission structure pays the broker 6–8% on a 1.20 factor A-paper deal, but 10–14% on a 1.40 factor C-paper deal. The funder is making more margin, so they share more.
This creates pressure for some brokers to submit your file to C-paper funders even when you'd grade as B paper. The result: you see worse offers than you should.
The fix is transparency. Always ask:
- Which funders are you submitting my file to?
- What's your commission on this deal?
- What grade would you classify my paper as?
A broker who won't answer these honestly is not working in your interest. A broker who will is rare and worth their commission.
Frequently asked questions
- How is paper grade determined?
- Funders weigh four primary factors: monthly revenue and deposit consistency, time in business, owner FICO score, and bank-statement health (NSF count, average daily balance, existing MCA payments). Industry, location, and processor history can also shift a deal between grades.
- Can I move from C to B paper over time?
- Yes — this is the most common upgrade path. Clean repayment of a C-paper MCA, 6–12 more months of operating history, and improved bank-statement metrics (lower NSFs, higher average daily balance) regularly move borrowers up a grade. The renewal offer is almost always better than the first.
- Why do brokers sometimes show me worse offers than I'd expect?
- Two reasons. First, brokers often submit to whichever funder pays the highest commission — not the one offering you the best terms. Second, some brokers don't update their funder relationships and continue to submit to higher-cost C-paper funders even when you'd qualify for A or B-paper terms.
- Do A-paper deals still have personal guaranties?
- Almost always yes. A-paper status reduces factor rates and gets you longer terms — it doesn't eliminate the personal guaranty. The only widely available no-PG products are revenue-based financing from a few specialized lenders (Pipe, Capchase) and certain Brex/Mercury products.
- What's the worst grade, and is it worth taking?
- Sub-C or 'D paper' deals — typically 1.49+ factor rates, terms under 90 days, daily ACH with no reconciliation, and aggressive collection terms. These are last-resort funding. Sometimes the right choice for a true emergency, but the default rate on D-paper is significantly higher than B or A. Most owners offered D-paper would be better served by negotiating with vendors, asking suppliers for terms, or selling assets first.