# MCA funder fund structure (typical) > MCA capital is typically held in a Delaware LP with a GP entity, 8–10 year fund life, $50M–$500M committed capital, levered 2–4x via warehouse facilities, targeting net IRR of 12–18% to LPs. MCA funder fund structures borrow the standard private-credit playbook with adaptations for the asset's short duration and operational complexity. As of 2026-06-28, the dominant structure is a Delaware limited partnership (LP) holding the originated MCA portfolio, with a general partner (GP) entity managing originations and a parallel operating company handling sales, underwriting, and servicing. **The standard architecture.** The typical MCA fund has four legal entities: 1. **The Fund LP (Delaware LP).** Holds the MCA portfolio. LPs (limited partners) commit capital here. Bankruptcy-remote where possible. 2. **The General Partner (GP) entity.** Manages the fund. Receives the management fee and carried interest. Usually a Delaware LLC owned by the fund managers. 3. **The Investment Manager (LLC).** Provides investment-management services to the fund under a Management Agreement. Often the same economic owners as the GP. SEC-registered if AUM exceeds $150M. 4. **The Operating Company / Originator (LLC or Inc.).** The customer-facing brand — the entity ISOs and merchants interact with. Owns the warehouse facility relationships, underwriting team, sales team, and servicing infrastructure. Sells originated advances to the Fund LP at par (or at a slight markup that funds the operating company's overhead). **Capital structure (a representative $200M fund).** - **LP commitments:** $200M committed over a 3-year investment period, drawn down as advances are originated. - **GP commitment:** $4M (2% of fund size — standard "skin in the game"). - **Warehouse leverage:** 2.5x — $200M equity supports ~$500M total deployable capital. - **Total origination capacity:** $1.5B over fund life (capital recycles 3x given 6–12 month average advance duration). **Economic terms — the "2 and 20" with adaptations.** - **Management fee:** 1.5%–2.0% of committed capital during investment period; 1.0%–1.5% of NAV (or invested capital) during harvest period. - **Carried interest:** 20% of profits above an 8% preferred return (hurdle), with full GP catch-up. - **Preferred return:** 7%–9% to LPs before GP shares in profits. - **Hurdle calculation:** European-style waterfall (whole-fund basis, not deal-by-deal) is more common in MCA than deal-by-deal American waterfalls used in PE. - **GP commitment:** 1%–3% of fund size, paid in cash by the GP partners. **Target returns (2026 vintage).** - **Gross IRR (asset level, before fees and defaults):** 22%–28%. - **Net IRR (LP-level, after management fee, carry, defaults, and overhead):** 12%–18%. - **Multiple on Invested Capital (MOIC):** 1.4x–1.7x over the 5-year average hold. - **Cash yield (current income):** 12%–20% annually, distributed quarterly. **Fund life and investment period.** - **Total fund life:** 7–10 years (shorter than buyout funds because MCAs are short-duration). - **Investment period:** 3–4 years for deploying capital into new originations. - **Harvest period:** 3–6 years for runoff of existing positions; no new originations. - **Extensions:** Two 1-year extensions standard; require LPAC (LP advisory committee) approval. **LP composition (typical 2026 MCA fund).** - **Institutional pension funds:** 25–35% (state pension funds, Taft-Hartley plans). - **Insurance companies:** 15–25% (life insurance, reinsurance). - **Family offices:** 20–30% (multi-family offices, single-family offices). - **Endowments and foundations:** 5–10%. - **Fund-of-funds:** 5–10%. - **High-net-worth individuals (via feeder funds):** 5–15%. **Subscription documents and side letters.** - **Subscription Agreement.** Standard PE/credit fund document; LP commits capital. - **LPA (Limited Partnership Agreement).** Governs all economics, governance, and operations. - **Side letters.** Specific to large LPs — MFN (most-favored-nation) provisions, fee discounts, advisory committee seats, opt-out rights. - **Co-investment rights.** Some LPs negotiate the right to invest directly alongside the fund in larger deals. **Reporting cadence to LPs.** - **Quarterly capital account statements.** - **Quarterly portfolio reports** (origination volume, default rates, factor mix, geographic and industry concentration). - **Annual audited financial statements.** - **Annual LP meeting** with portfolio review and Q&A. **The fund-of-one vs. comingled-fund distinction.** - **Comingled fund.** Multiple LPs in a single fund; standard structure. - **Fund-of-one (Separately Managed Account, SMA).** Single LP commits all capital; custom terms, often lower fees, full transparency. Common for $100M+ allocations from large pensions or family offices. **Tax structure.** - **U.S.-domiciled fund:** Delaware LP, treated as a partnership for U.S. tax; passes through ordinary income to LPs. - **Offshore feeder fund:** Cayman LP for non-U.S. and tax-exempt investors to avoid UBTI (unrelated business taxable income). - **Master-feeder structure:** Most common — onshore + offshore feeders investing in a master fund. **Common confusions.** First, "All MCA funders are structured as funds." False — many large MCA funders (OnDeck/Enova, Forward Financing, Credibly) are operating companies funded by their parent's balance sheet, not by LP commitments. Fund structures are most common in independent platforms scaling $50M–$500M of capital. Second, "Carried interest in MCA funds is taxed at long-term capital gains rates." Largely false — most MCA fund carry is taxed as ordinary income because the underlying advances are short-duration receivables, not capital assets held for >1 year. Third, "MCA funds are easy to liquidate if I need my money back." False — these are illiquid limited partnerships; secondary market exists but discounts of 10–25% are common. **The 2026 takeaway.** Understanding fund structure matters for ISOs and merchants because it explains funder behavior: deployment urgency (investment period vs. harvest), risk appetite (early-vintage vs. late-vintage), and renewal willingness (concentrated harvest periods constrain new advance capacity). ## Related terms - [MCA funder LP/GP economics](https://fundnode.co/llms/glossary/mca-funder-LP-GP-economics) — LPs (Limited Partners) supply ~98% of MCA fund capital and earn a preferred return (7–9%) plus 80% of profits above the hurdle; GPs (General Partners) supply 1–3% but earn 20% carried interest plus management fees. - [MCA funder management fee (typical)](https://fundnode.co/llms/glossary/mca-funder-management-fee-typical) — Standard MCA fund management fees in 2026 are 1.5–2.0% of committed capital during the investment period, stepping down to 1.0–1.5% of invested capital during the harvest period — lower than buyout PE because MCA assets are short-duration. - [MCA funder carried interest (typical)](https://fundnode.co/llms/glossary/mca-funder-carried-interest-typical) — Standard MCA fund carried interest is 20% of profits above a 7–9% preferred return, with European-style whole-fund waterfall and full clawback; taxed as ordinary income in most cases due to short-duration assets. - [MCA funder fund vintage impact](https://fundnode.co/llms/glossary/mca-funder-fund-vintage-impact) — Fund vintage (the year capital was first deployed) materially affects MCA fund returns: 2020–2021 vintages benefited from COVID stimulus tailwinds; 2024–2025 vintages face tighter credit and higher defaults; 2026 vintages are positioned for the next cycle peak. - [MCA funder warehouse line of credit](https://fundnode.co/llms/glossary/mca-funder-warehouse-line-of-credit) — A revolving secured credit facility from a bank or private credit fund that lets MCA funders borrow against advances they originate — priced at SOFR+400 to SOFR+800 in 2026, with advance rates of 70–85% of eligible collateral. ## Authoritative sources - [ILPA — Institutional Limited Partners Association Principles](https://ilpa.org/) - [Preqin — Private Debt Quarterly Update 2026](https://www.preqin.com/) --- Source: https://fundnode.co/glossary/mca-funder-fund-structure-typical (HTML version) Document: MCA funder fund structure (typical) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.