# 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.

E-paper is the bottom of the MCA underwriting tier ladder. It is the last-resort capital for merchants who cannot qualify at A, B, C, or D tiers. Most mainstream funders won't fund E-paper — it is served by a small group of specialty deep-subprime funders. Updated for 2026.

**The E-paper merchant profile.**

E-paper merchants typically present with most or all of the following:

- **FICO under 525.** Often in the 450–520 range, sometimes from charge-offs and collections.
- **NSF count 8+ in last 90 days.** Sometimes 12–20+.
- **Negative-balance days 10+ per month.** Persistent overdraft pattern.
- **Active second or third position MCA in repayment.** Already stacked.
- **Recent bankruptcy.** Chapter 13 in active repayment plan, or Chapter 7 discharge under 12 months.
- **Active tax liens.** Federal or state, often unpaid.
- **Multiple recent civil judgments.** Unsecured creditor judgments.
- **Time-in-business as short as 4–6 months.**
- **High-risk industry.** Cannabis, ATM, gambling, payday lending, adult content, firearms, telemarketing.

**E-paper funder profile.**

E-paper is served by a small number of deep-subprime specialty funders, often with capital from single high-net-worth investors or family offices targeting 25–40% IRR:

- **Specialty deep-subprime MCA shops (typically $5M–$30M AUM).**
- **Distressed-credit-focused private investors.**
- **Some restructure successors to defunct C-D paper funders.**

These funders accept default rates of 25–40% (vs. 6–10% for A-paper). Their economic model only works at very high factor rates.

**E-paper pricing structure.**

- **Factor rates:** 1.55–1.80. A $25,000 E-paper advance costs $13,750–$20,000 in fees.
- **Term:** Typically 3–5 months. Shorter terms reduce default exposure.
- **Daily ACH:** Roughly $260–$340/day on $25K advance ($38.75K–$45K total repayment over 4 months = $645–$750/day).
- **Origination fees:** 3–6% deducted from advance.
- **Prepayment:** Minimum 100% factor honored even on early payoff.
- **Required collateral:** Often a personal asset (vehicle title, business equipment, real estate equity, business receivables UCC blanket).

**Advance amount caps.**

E-paper advances are typically capped low to limit funder exposure:

- **Maximum advance:** Often $25,000–$50,000 (vs. $250K–$500K for A-paper).
- **Minimum advance:** Usually $5,000–$8,000.

**Underwriting evidence required for E-paper.**

E-paper underwriting is the most thorough across all tiers:

- **Last 6 months bank statements.**
- **Voided check + bank login credentials (mandatory at most E-paper funders).**
- **Hard credit pull on guarantor.**
- **Background check including criminal history.**
- **Bankruptcy court filing search.**
- **Tax lien and judgment search (federal + state).**
- **Secretary of state entity verification.**
- **Landlord verification or facility lease.**
- **Personal asset verification.**
- **Sometimes second guarantor required (spouse or business partner).**

**Speed of E-paper funding.**

- **E-paper:** 3–7 business days typical.
- **A-paper:** 4–24 hours typical.

**Default and recovery on E-paper.**

E-paper expected default rates are 25–40%. Recovery is typically 10–25% of remaining balance through:

- **UCC blanket lien enforcement** on business equipment, receivables, inventory.
- **Personal guarantee enforcement** including personal asset attachment.
- **Confession of Judgment (where state allows).**
- **Collection placement at 30–50% of recovered amount.**
- **Judgment renewal and decade-long enforcement window.**

**The "merchant of last resort" reality.**

E-paper merchants typically have exhausted A/B/C/D paper options because of credit deterioration, prior default, or active subprime debt. The marginal cost of E-paper capital is so high that ROI must be very specific and well-defined. Common acceptable uses:

- **Emergency equipment repair** where downtime is more expensive than MCA cost.
- **Bridge to confirmed asset sale** (real estate close, settlement payout).
- **Imminent business survival capital** with disciplined repayment plan.

**The debt-spiral risk on E-paper.**

The most common failure mode: E-paper merchant uses advance for general working capital, finds daily ACH unsustainable, defaults within 60 days, faces UCC enforcement and personal guarantee execution, files Chapter 7 within 6 months.

ISO brokers and consumer advocates generally counsel against E-paper unless the merchant has a specific high-ROI use case and a disciplined exit plan. Many ethical brokers will decline E-paper merchants and refer them to non-MCA alternatives (SBA microloan, CDFI, family loan, asset sale).

**Alternatives to consider before E-paper.**

1. **SBA microloan ($500–$50K)** through CDFI lender, even with poor credit.
2. **Revenue-based financing** via Clearbanc, Capchase, Pipe.
3. **Invoice factoring** if the business has receivables.
4. **Asset sale** of underutilized business or personal assets.
5. **Family loan** with documented terms.
6. **State/local emergency grant programs** (post-COVID, post-disaster programs still active in some states).

**Common confusion.** First, "E-paper is illegal." False — E-paper is legal but heavily disclosed in licensed states (CA, NY, etc.). Second, "no funder will fund E-paper." False — specialty funders exist, but they are selective. Third, "E-paper is the same as predatory lending." Categorically not the same — E-paper is high-risk capital with disclosed pricing; predatory practices are separately defined and illegal.

## 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 — D paper explained](https://fundnode.co/llms/glossary/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.
- [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 default](https://fundnode.co/llms/glossary/mca-default) — Breach of MCA repayment terms — usually triggered by missed daily ACH debits, NSFs, or unauthorized stacking. Consequences range from increased collection pressure to UCC enforcement and personal-guarantee pursuit.

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Document: MCA credit tier — E paper explained — Fundnode MCA Glossary
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