# MCA funder paper grade C (detailed) > C paper in MCA underwriting describes the stressed 20–30% of funded merchants: 550–599 personal FICO, 6–12 months in business, $7K–$15K average monthly revenue, 5–10 NSFs in 90 days, one open MCA position — pricing at factor 1.40–1.50 with 2–4 month terms and limited renewal eligibility. C paper is the third underwriting tier in MCA portfolio classification, representing merchants with visible financial stress but still enough revenue and operational signal to be approvable by specialty funders. C paper makes up roughly 20%–25% of total funded volume in 2026 and is exclusively the domain of higher-risk, higher-margin funders. **The qualifying criteria (2026 standard).** - **Personal FICO:** 550–599. - **Business FICO / PayNet:** 30–50 percentile, frequent late-pay activity acceptable. - **Time in business:** 6–12 months. - **Average monthly revenue:** $7K–$15K deposits. - **Average daily balance:** $300–$1K positive; multiple negative-balance days tolerated. - **NSFs:** 5–10 in last 90 days, ≤20 in last 12 months. - **UCC filings:** One open MCA UCC acceptable; second position eligible. - **Existing MCA position:** One active, with willingness to stack a second position. - **Public records:** Small open judgments acceptable, tax liens under $25K acceptable, bankruptcy possible if discharged 2+ years. **The pricing tier.** - **Factor rate:** 1.40–1.50. - **APR-equivalent:** 120%–200%. - **Holdback / specified percentage:** 12%–18% of daily deposits. - **Term length:** 2–4 months. - **Advance size:** $5K–$50K. - **ISO commission:** 5%–8% of funded amount. - **Funding speed:** Same-day to 48 hours. **The funders who compete for C paper.** C paper is the domain of specialty funders who underwrite higher risk for higher margin: Yellowstone Capital (legacy operations), Knight Capital, Cresthill Capital, World Business Lenders, Everest Business Funding, Velocity Capital Group, Reliant C-paper desk, plus dozens of small balance-sheet shops. Many C-paper funders also write second-position MCA, which adds another layer of risk. **The underwriting workflow.** C paper is heavily manual. Underwriters look at every bank statement, scrutinize deposit consistency, evaluate vertical-specific risk factors, and often interview the merchant directly. Approval timelines vary widely — same-day for well-packaged files, 48 hours for complex situations. Stacking-aware funders verify the merchant's existing MCA balance and structure the new advance around remaining repayment capacity. **Worked example.** Retail merchant: 570 FICO, 9 months in business, $11K/month average deposits, 7 NSFs in 90 days, one active MCA from Funder A with $8K balance remaining. Funder Y offers second-position: - $15K at 1.45 factor, 4-month term, 14% holdback, 7% ISO commission. Total daily debit burden post-funding: Funder A's existing debit plus Funder Y's new debit. The merchant must have sufficient daily revenue to support both — typically requires $400+ daily deposits to make the math work. **The default mechanics.** C-paper default rates run 15%–30%, three to five times A-paper default rates. Funders price for this — at factor 1.45 and 30% default rate, gross margin on the surviving 70% still produces target IRR. Default scenarios involve early NSF spirals (most common), stacking-driven cash flow collapse, or seasonal revenue gaps that the merchant cannot bridge. **The renewal economics.** C paper has limited renewal eligibility — perhaps 30%–40% renew within 120 days of payoff, and many of those who renew shift to a different funder rather than the original. The ISO economics on C paper are largely transactional: earn the commission, move on. **The ISO economics.** - Commission rates 5%–8%; absolute dollar commission lower than A or B. - C-paper merchants are not price-sensitive — they need capital, period. - ISO competitive advantage comes from knowing which C-paper funders accept which vertical risks; many merchants get declined by multiple funders before finding the right fit. **The ethical considerations.** C-paper pricing (120%–200% APR-equivalent) raises real ethical questions. Disclosed-commission ISOs (Fundnode model) typically counsel C-paper merchants to consider alternatives — CDFI loans, microloans, negotiating with existing creditors — before accepting C-paper financing. Predatory ISO behavior is most common in C-paper because the margin pressure is highest and merchant alternatives are weakest. **Common confusions.** First, "C paper is always second-position." False — many C-paper deals are first-position for merchants with no existing MCA. Second, "C paper merchants are doomed." False — 70%–85% repay successfully; the tier is stressed but not unviable. Third, "C paper pricing is illegal usury." Debatable — MCA contracts are structured as purchase-of-future-receivables, not loans, which exempts them from state usury laws in most jurisdictions; the legal question is whether the structure is genuine purchase or disguised lending. Fourth, "C paper has no renewal value." False — 30%–40% renew; just lower than A or B. Fifth, "All ISOs route C-paper merchants to specialty funders." False — many ethical ISOs decline to write C paper because the pricing is hard to defend. **The strategic takeaway.** C paper exists because banks and prime lenders won't touch these merchants. The pricing is high because risk is high and capital is expensive. ISOs who write C paper should disclose all pricing transparently and counsel merchants on alternatives. Merchants taking C paper should treat it as bridge capital, not long-term financing. ## 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 funder paper grade B (detailed)](https://fundnode.co/llms/glossary/mca-funder-paper-grade-B-detailed) — B paper in MCA underwriting describes the middle 30–40% of funded merchants: 600–659 personal FICO, 12–18 months in business, $15K–$25K average monthly revenue, 3–5 NSFs in 90 days, possibly one closed-out MCA UCC — pricing at factor 1.30–1.40 with 3–6 month terms and selective renewal eligibility. - [MCA funder paper grade D (detailed)](https://fundnode.co/llms/glossary/mca-funder-paper-grade-D-detailed) — D paper in MCA underwriting describes the highest-risk 10–15% of funded merchants: sub-550 personal FICO, 3–6 months in business, $3K–$7K average monthly revenue, 10+ NSFs in 90 days, multiple open MCA positions or stacked debt — pricing at factor 1.50+ with 30–90 day terms and effectively no renewal eligibility. - [Second-position MCA (stacking)](https://fundnode.co/llms/glossary/second-position-mca) — A second-position MCA is an advance taken while a prior MCA is still active — also called stacking. Most A-paper funders prohibit it; the funders who allow it price significantly higher. ## Authoritative sources - [deBanked — Specialty MCA Funder Reviews](https://debanked.com/) - [CFPB — Small Business Financing Disclosure](https://www.consumerfinance.gov/) --- Source: https://fundnode.co/glossary/mca-funder-paper-grade-C-detailed (HTML version) Document: MCA funder paper grade C (detailed) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.