# MCA funder portfolio buyout mechanics > An MCA portfolio buyout is the sale of a funder's outstanding receivables to a third party, typically at 70–95 cents on the dollar, with the buyer assuming collection rights, reconciliation obligations, and (sometimes) ISO commissions. Portfolio buyouts move MCA receivables between funders, syndicators, or distressed-debt buyers. They are common at funder wind-down, distress, or strategic exit. Updated 2026-06-28. **What is a portfolio buyout.** A buyer purchases the right to collect a defined pool of outstanding MCAs from the seller. The buyer wires the purchase price; the seller assigns contracts, files UCC continuation statements (if needed), and notifies merchants of the assignment. **Pricing — the discount.** Healthy performing portfolio: 85–95 cents on the dollar of remaining receivable balance. Average performing portfolio with some delinquency: 70–85 cents. Distressed portfolio with substantial defaults or stacking exposure: 40–70 cents (sometimes lower). Dead-pool/charge-off portfolio: 5–15 cents (collected by specialty distressed debt buyers). The discount captures: - Time value of remaining cash flows. - Default probability of unpaid balances. - Servicing cost transfer. - Buyer's required return on capital (typically 18–30% IRR). **Who buys.** - **Strategic acquirers** — other MCA funders looking to grow book without origination spend. Pay highest prices for clean books. - **Specialty syndication funds** — buy A-paper at modest discounts to redeploy capital from low-yield public credit. - **Distressed debt buyers** — specialize in stacked or defaulted MCA paper at deep discounts. - **Private equity** — sometimes use buyouts as platform deals to enter MCA. **Common scenarios triggering buyouts.** 1. **Funder wind-down.** Funder exiting industry sells full book to recover capital for investors. 2. **Funder distress.** Warehouse line called or covenants breached; funder must monetize book to repay bank. 3. **Strategic divestiture.** Funder exits an industry vertical (e.g., cannabis) and sells the vertical's book. 4. **Renewal-driven monetization.** Funder sells back-book to free balance-sheet capacity for new originations. **Mechanics of execution.** - **Data room.** Seller provides loan tape, payment history, contract scans, merchant contact data. - **Due diligence.** Buyer samples 10–30% of contracts, checks reconciliation history, validates state-law compliance. - **Pricing offer.** Buyer offers per-contract or per-pool discount. - **Definitive agreement.** APA (Asset Purchase Agreement) details rep & warranties on contract validity, no stacking, default rate. - **Closing.** Wire transfer, UCC assignments, merchant notifications via Notice of Assignment letter. - **Post-close servicing.** Buyer assumes ACH collection authority; merchant typically sees new ACH descriptor on bank statement. **Merchant impact.** A buyout itself does not change the merchant's contractual obligation — total repayment, ACH amount, and factor rate stay the same. What can change: - New customer service team (often less familiar with the merchant's history). - Tighter reconciliation policy if buyer has less flexible workout standards. - Aggressive collection style if distressed-debt buyer acquired the contract. - New ACH descriptor causing merchant confusion or accidental dispute filings. - Different prepayment discount terms if the new servicer interprets the contract differently. **ISO impact.** ISO commissions on the bought-out portfolio: - **Performing portfolios:** Buyer often honors trailing commissions to preserve ISO relationships. - **Distressed portfolios:** Buyer typically does NOT honor trailing commissions. ISO loses renewal economics. - **Funder wind-down:** ISO commission claims become unsecured claims against the wound-down entity (often recover pennies). **Syndication impact.** Syndication partners who funded the original advance face complex outcomes: - Healthy buyout: syndicators receive payout at face value or modest discount. - Distress buyout: syndicators often take loss equal to (1 - sale price / face value). - The 2023 wind-down of several mid-market funders cost syndicators 20–35% of invested capital. **Legal documentation.** - **APA (Asset Purchase Agreement).** Master document. - **Bill of Sale.** Per-contract assignment. - **UCC-3 Assignment.** Public-record assignment of secured interest. - **Notice of Assignment.** Sent to merchant. - **Servicing Transfer Agreement.** Operational handover. - **Reps & Warranties.** Seller represents contracts are valid, no stacking, ACH authority current, no pending litigation. **Common buyout disputes.** - **Loan tape inaccuracy.** Seller misrepresented default rate or contract terms. - **Stacking exposure.** Buyer discovers undisclosed second positions. - **Servicing gap.** ACH authority lapsed during transfer, causing missed payments. - **Merchant litigation.** Pending suits not disclosed pre-close. **Tax considerations.** - Seller recognizes gain or loss vs. book value. - Buyer establishes new tax basis at purchase price. - Discount accretion taxed as ordinary income to buyer over remaining term. **Common confusions.** First, "buyout means my MCA is canceled." False — full obligation transfers to new owner. Second, "I have to consent to the buyout." False — assignment clauses in most MCA contracts allow without consent. Third, "ISOs always get paid trailing commission." False — distressed buyouts usually wipe out commissions. Fourth, "buyouts only happen at distress." False — strategic buyouts are common at healthy portfolios. Fifth, "the buyer must keep the same reconciliation policy." False — buyer adopts its own policy unless contract specifies otherwise. ## Related terms - [MCA buyout](https://fundnode.co/llms/glossary/mca-buyout) — When a new funder pays off your existing MCA and issues a single replacement advance — used to consolidate stacked positions or escape a predatory funder. Often costly net-net. - [MCA funder private equity acquisition impact (detailed)](https://fundnode.co/llms/glossary/mca-funder-private-equity-acquisition-impact-detailed) — When private equity acquires an MCA funder, ISO commissions usually compress 50–150 bps, factor rates tighten on A-paper, and reconciliation discretion shrinks within 12–18 months post-close. - [MCA funder bank partnership models (detailed)](https://fundnode.co/llms/glossary/mca-funder-bank-partnership-models-detailed) — MCA funders partner with banks four main ways in 2026: warehouse credit lines, bank-as-originator pass-through, white-label MCA programs, and referral-only arrangements. Each shifts risk and capital differently. - [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. ## Authoritative sources - [deBanked — Portfolio Buyout Tracker](https://debanked.com/) - [Specialty Finance — Distressed MCA Market](https://www.specialtyfinance.com/) --- Source: https://fundnode.co/glossary/mca-funder-portfolio-buyout-mechanics (HTML version) Document: MCA funder portfolio buyout mechanics — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.