# MCA credit tier — D paper explained > D-paper MCAs serve merchants with 525–579 FICO, 5–7 NSFs in 90 days, or active second-position debt; factor rates run 1.42–1.55 with terms under 6 months. D-paper is the MCA credit tier that serves merchants with significant credit and bank-account issues but who still have demonstrable revenue. It sits between C-paper (workable) and E-paper (last resort) in the underwriting hierarchy. Updated for 2026. **The D-paper merchant profile.** A typical D-paper merchant has at least three of these characteristics: - **FICO 525–579.** Below A/B/C-paper minimums (typically 600+ for B, 580+ for C). - **NSF count 5–7 in last 90 days.** Above tolerances for A/B/C-paper underwriting. - **Negative-balance days 4–8 per month.** Suggests cash-flow stress. - **Existing MCA in active repayment.** Second-position or third-position scenarios. - **Industry restriction.** Trucking (high cancellation rate), restaurant in distressed market, retail in declining vertical. - **Time-in-business 6–12 months.** Below 12-month threshold most A-paper funders require. - **Recent tax lien or judgment.** Under $25K, not yet paid. **D-paper funder profile.** D-paper is served by specialty subprime funders, not Tier 1 mainstream MCA funders. Top D-paper funders in 2026: - **Yellowstone Capital (post-restructure).** - **GRP Funding.** - **Mantis Funding.** - **United Capital Source (UCS).** - **Various small-portfolio ISO-owned funders ($10M–$50M AUM).** These funders use higher cost of capital (typically equity at 18–25% IRR or single-investor backing) and higher default tolerance (15–25% expected default rate vs. 6–10% for A-paper). **D-paper pricing structure.** - **Factor rates:** 1.42–1.55. A $50,000 D-paper advance costs $21,000–$27,500 in fees. - **Term:** Typically 4–6 months. Short terms protect funders against borrower deterioration. - **Daily ACH:** Roughly $200–$400/day on $50K advance ($75K–$77.5K total repayment over 5 months = $605–$610/day). - **Holdback:** Often replaced with fixed daily debit (more predictable for funder). - **Origination fees:** 2–5% deducted from advance amount. - **Prepayment:** Typically minimum 80–100% factor honored even on early payoff (vs. 50–75% for A-paper). **Underwriting evidence required for D-paper.** D-paper underwriting is paradoxically more thorough than A-paper because of the elevated risk: - **Last 4 months bank statements (vs. 3 for A-paper).** - **Voided check from primary operating account.** - **Hard credit pull on personal guarantor.** - **Background check (often) — bankruptcy and judgment search.** - **Secretary of state lookup confirming entity active.** - **Plaid/MX or Yodlee bank connection (mandatory at most D-paper funders).** - **Recent merchant processor statements (where applicable).** - **Landlord verification or facility lease.** **Speed of D-paper funding.** D-paper deals fund slower than A-paper because of additional underwriting requirements: - **D-paper:** 2–5 business days typical. - **A-paper:** 4–24 hours typical. **Default and recovery on D-paper.** D-paper portfolios have expected default rates of 15–25% (vs. 6–10% for A-paper, 10–15% for B/C-paper). Recovery on D-paper defaults is typically 15–30% of remaining balance through: - **Confession of Judgment (COJ) enforcement** in states allowing it (NY, several others until 2024 ban). - **UCC blanket lien enforcement** on business assets. - **Personal guarantee enforcement.** - **Collection agency placement at 25–40% of recovered amount.** **The D-paper churn pattern.** D-paper merchants often "renew" MCA balances before paying off the original. A common pattern: merchant takes $30K MCA at 1.48 factor, after 60 days of payments has paid down to $25K balance, refinances with the same funder for $50K new advance — payoff $25K to funder, net new capital $13K to merchant (after origination fees and remaining factor difference). Cycle repeats every 60–90 days. After 12 months, merchant has paid roughly $48K in factor fees on $40K net new capital. This is why ISO brokers and consumer advocates flag D-paper as the highest-friction tier — it can become a debt-cycle trap if not refinanced into longer-term capital (SBA, term loan, line of credit). **When D-paper makes sense.** - **Bridge to confirmed exit event.** Tax refund, real estate sale, customer payment. - **Emergency capital with high ROI.** Equipment repair where downtime costs more than the MCA cost. - **Recovery scenario.** Post-bankruptcy or post-judgment rebuild capital. **When D-paper does not make sense.** - **Working capital with no exit.** Cycle trap. - **Marketing spend or growth investment.** Cost too high to produce positive ROI. - **Refinance of A/B/C-paper debt.** Step backward in credit hierarchy. **Common confusion.** First, "D-paper means subprime." Roughly correct but not all subprime is D-paper — E-paper exists below D. Second, "D-paper funders are predatory." Not categorically — many serve real merchant need with disclosed pricing. Third, "D-paper credit score equals personal FICO." False. D-paper underwriting weighs bank statement strength and revenue more heavily than personal FICO. ## Related terms - [Paper grade (A/B/C/D)](https://fundnode.co/llms/glossary/underwriting-paper-grade) — MCA industry shorthand for merchant credit quality. A-paper qualifies for cheapest factor (1.15–1.28); D-paper is high-risk, factor 1.45+, often declined. - [MCA paper grades explained](https://fundnode.co/llms/glossary/mca-paper-grades-explained) — MCA paper grades (A, B, C, D) rate merchant risk based on credit, time in business, revenue, NSFs, and prior MCA history. A-paper qualifies for cheapest factors (1.15-1.28); D-paper sees 1.45+ factors and short 4-6 month terms. - [MCA credit tier — E paper explained](https://fundnode.co/llms/glossary/mca-credit-tier-e-paper-explained) — E-paper is the deepest subprime MCA tier — sub-525 FICO, 8+ NSFs, recent bankruptcy or third-position debt; factor rates 1.55–1.80 with 3–5 month terms. - [Factor rate](https://fundnode.co/llms/glossary/factor-rate) — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound. - [MCA renewal](https://fundnode.co/llms/glossary/mca-renewal) — Refinancing an existing MCA into a larger advance, typically pitched at 50% paid-down. Often masks worse pricing — the new factor is applied to a new principal that includes the old balance. --- Source: https://fundnode.co/glossary/mca-credit-tier-d-paper-explained (HTML version) Document: MCA credit tier — D paper explained — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.