# MCA funder default rate by industry (detailed)

> MCA default rates by industry in 2026: services 4–7%, retail 6–10%, restaurant 8–14%, trucking 12–22%, construction 10–18%, cannabis 18–30%, adult entertainment 20–35%.

Default rates are the inverse measure of underwriting success and the foundation of MCA portfolio risk modeling. Each industry has distinct default patterns driven by revenue volatility, cost structure, and regulatory environment. Updated 2026-06-28.

**Default definition.**

In MCA context, "default" typically means:

- 60+ days ACH non-payment.
- Merchant ACH revocation or business closure.
- Bankruptcy filing.
- Material breach of contract (lying about revenue, undisclosed stacking).

Some funders use 90-day measure; others measure at 60. Industry comparisons use 90-day standard where possible.

**Services — lowest default.**

- **90-day default rate:** 4–7%.
- **Sub-categories:** professional services, IT consulting, marketing agencies, legal, accounting.
- **Drivers of low default:** Low overhead, recurring revenue, low capital intensity.
- **Trend:** Stable at 4–7% across 2022–2026.
- **Outliers:** Marketing agencies dependent on single client face spikes if anchor client lost.

**Retail — moderate default.**

- **90-day default rate:** 6–10%.
- **Sub-categories:** specialty retail, e-commerce, convenience.
- **Drivers:** Inventory risk, foot-traffic decline.
- **Trend:** Modest increase 2023–2026 as e-commerce competition intensified.
- **Outliers:** Brick-and-mortar specialty retail in malls facing 10–14% default.

**Restaurant — moderate-high default.**

- **90-day default rate:** 8–14%.
- **Sub-categories:** QSR (8–11%), full-service (10–14%), food truck (12–18%).
- **Drivers:** Food cost volatility, labor cost inflation, lease pressure.
- **Trend:** Spiked to 15–20% during COVID, recovered to 8–14% by 2024.
- **Outliers:** Independent full-service restaurants in second year of operation face 18–25% default.

**Trucking — high default.**

- **90-day default rate:** 12–22%.
- **Sub-categories:** owner-operator (18–25%), small fleet (12–18%), broker (15–22%).
- **Drivers:** Fuel cost volatility, broker-load dependency, equipment maintenance.
- **Trend:** Increased sharply 2023–2026 due to freight recession; some sub-segments exceed 25%.
- **Outliers:** Owner-operators in 2024–2026 freight recession have seen default spikes to 30%.

**Construction — moderate-high default.**

- **90-day default rate:** 10–18%.
- **Sub-categories:** GC (8–14%), subcontractor (12–18%), specialty trades (10–16%).
- **Drivers:** Project completion risk, slow-pay GC, lien complications.
- **Trend:** Stable but elevated; recent labor cost increases pressuring sub-segment.
- **Outliers:** Subcontractors with single-GC concentration face 18–25% default.

**Healthcare — low default.**

- **90-day default rate:** 5–9%.
- **Sub-categories:** dental (4–7%), optometry (5–8%), chiropractic (6–10%), urgent care (5–9%).
- **Drivers:** Stable insurance receivables, predictable patient volume.
- **Trend:** Stable.
- **Outliers:** Cash-pay concierge practices show higher volatility (8–12%).

**Auto services — moderate default.**

- **90-day default rate:** 7–12%.
- **Sub-categories:** auto repair (6–10%), body shop (8–12%), used car dealer (15–25%).
- **Drivers:** Equipment investment cycle, parts inventory.
- **Trend:** Stable except used car dealers which face elevated defaults.

**Personal care — low default.**

- **90-day default rate:** 5–9%.
- **Sub-categories:** hair salon (5–8%), nail salon (6–9%), spa (7–10%), fitness studio (8–12%).
- **Drivers:** Recurring revenue, low capital intensity.
- **Trend:** Stable.
- **Outliers:** Fitness studios facing post-COVID membership volatility (10–15%).

**E-commerce — moderate-high default.**

- **90-day default rate:** 9–15%.
- **Drivers:** Amazon platform dependency, inventory turnover risk, return rate exposure.
- **Trend:** Increased 2024–2026 as Amazon FBA fee structures tightened.
- **Outliers:** Drop-shippers face 15–22% default.

**Manufacturing — moderate default.**

- **90-day default rate:** 7–12%.
- **Drivers:** Equipment cycles, B2B receivable aging, supply chain risk.
- **Trend:** Stable.

**Cannabis — high default.**

- **90-day default rate:** 18–30%.
- **Drivers:** Banking restrictions cause cash management challenges, regulatory complexity, market price volatility.
- **Trend:** Improving as state markets mature.
- **Outliers:** Recreational-only operators in saturated markets (CO, CA, OR) face 25–35% default.

**Adult entertainment — very high default.**

- **90-day default rate:** 20–35%.
- **Drivers:** Reputational risk, payment processor restrictions, regulatory volatility.
- **Trend:** Stable but high.

**Default rate vs. loss given default (LGD).**

Default rate measures probability; LGD measures severity:

- **Services default LGD:** 35–50% (recovery via collection).
- **Restaurant default LGD:** 55–75% (low collateral recovery).
- **Trucking default LGD:** 60–80% (equipment-based recovery).
- **Cannabis default LGD:** 70–90% (illegal product complicates recovery).

**State-specific default variations.**

- **California:** restaurant defaults higher due to labor cost pressure.
- **Texas:** trucking defaults lower due to oil/gas freight stability.
- **Florida:** construction defaults lower due to active market.
- **New York:** retail defaults higher due to high overhead.

**Time-in-business effect.**

Default rate inversely correlates with time in business:

- 0–12 months operating: default 18–30% across industries.
- 12–24 months: default 12–20%.
- 24–36 months: default 8–14%.
- 36+ months: default 5–10%.

**Stacking effect.**

Already-stacked merchants default 2–3x baseline rate regardless of industry.

**Renewal effect.**

Renewed merchants default at 30–50% lower rate than first-time merchants — successful renewal is the best risk signal funders have.

**ACH structure effect.**

Daily ACH defaults lower than weekly ACH; weekly defaults lower than card-split.

**Reconciliation effect.**

Funders with generous reconciliation policies (Credibly, Forward Financing) report 10–20% lower default rates than aggressive funders — workout flexibility avoids preventable defaults.

**Common confusions.**

First, "default rate equals charge-off rate." Charge-off typically lags default by 30–60 days.

Second, "all funders use same default definition." False — meaningful variation.

Third, "industry default rates predict individual deal." Imperfectly — within-industry variance is large.

Fourth, "low default industries are most profitable." Not necessarily — pricing reflects risk.

Fifth, "default rate is publicly available." False — proprietary; published figures often portfolio-wide.

## Related terms

- [MCA funder approval rate by industry (detailed)](https://fundnode.co/llms/glossary/mca-funder-approval-rate-by-industry-detailed) — MCA funder approval rates vary widely by industry in 2026: services 55–70%, retail 45–60%, restaurant 40–55%, trucking 30–45%, construction 25–40%, cannabis 5–15%.
- [MCA funder portfolio concentration risk (detailed)](https://fundnode.co/llms/glossary/mca-funder-portfolio-concentration-risk-detailed) — MCA funder portfolio concentration risk has four primary dimensions: industry concentration (typically capped at 20–25%), geographic concentration (15–20% per state), broker concentration (5–10% per broker), and merchant size concentration.
- [MCA funder tiered pricing model (detailed)](https://fundnode.co/llms/glossary/mca-funder-tiered-pricing-model-detailed) — MCA funders use tiered pricing models with 4–6 tiers (A through D/E paper), assigning factor rates from 1.15–1.55 based on time-in-business, monthly revenue, FICO, industry, and prior MCA history.

## Authoritative sources

- [Federal Reserve — Small Business Default Tracker](https://www.fedsmallbusiness.org/)
- [deBanked — Industry Default Report](https://debanked.com/)

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Document: MCA funder default rate by industry (detailed) — Fundnode MCA Glossary
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