# MCA funder portfolio default rate trends (2026) > Industry-wide MCA default rates in 2026 trend 11–18% on B-paper and 6–10% on A-paper, up 2–4 points from 2024 driven by tariff-impacted SMBs, restaurant labor cost compression, and tightening credit at top-tier funders. MCA portfolio default rates in 2026 are running higher than the prior two years, with industry-wide composite defaults trending into a band that funders publicly admit is "elevated but not crisis." **Composite default rate, 2026 (industry estimates).** - **A-paper (650+ credit, $25K+/mo deposits, 18+ months operating):** 6–10% lifetime default. - **B-paper (580–649 credit, $15K+/mo deposits, 12+ months operating):** 11–18% lifetime default. - **C/D-paper (sub-580 credit, irregular deposits, NSF history):** 22–35% lifetime default. These are up roughly 2–4 percentage points across all paper grades vs. 2024, the largest single-year shift since the 2020 pandemic spike. **What drove the 2026 increase.** - **Tariff-impacted SMBs.** Late-2025 tariff shifts hit import-dependent retail and DTC categories hardest. Funders with concentration in these verticals (CAN Capital, Kapitus, Reliant) reported above-trend defaults Q1 2026. - **Restaurant labor cost compression.** Minimum wage increases in FL, NY, CA combined with food-cost inflation pushed restaurant operating margins from 6% (2023) to 2–3% (2026). Restaurant default rates jumped from 14% to 19% on B-paper. - **Trucking sector freight recession.** Spot rates remained depressed through Q1 2026. Trucking MCA defaults at funders like Reliant and Mulligan crossed 22% on B-paper. - **Stacking enforcement gaps.** UCC search tools improved but stacking-by-omission still drives 25–30% of all defaults industry-wide. - **Tightening top-tier credit.** Banks pulled SBA Express programs in late 2025, pushing higher-quality merchants down-market into MCA — funders captured better merchants but at thinner margins. **Sector-level 2026 default rates.** - **Restaurants (full-service):** 18–24% on B-paper. - **Restaurants (QSR/fast casual):** 12–16% on B-paper. - **Trucking (small fleet):** 20–28% on B-paper. - **Construction (general):** 14–19% on B-paper. - **Retail (brick-and-mortar):** 16–22% on B-paper. - **Auto repair:** 10–14% on B-paper (most stable sector). - **Medical/dental/professional services:** 7–10% on A-paper. - **E-commerce (Shopify/Stripe data):** 9–13% on B-paper. **Funder-tier patterns.** - **Top 10 funders by volume** (CAN Capital, Credibly, Rapid Finance, Forward Financing, Kapitus, etc.): composite default rate 9–13% in 2026, vs. 7–11% in 2024. - **Mid-tier funders** (positions 11–50 in volume): composite default 13–19%, vs. 11–15% in 2024. - **D-paper specialists**: composite default 25–35%, roughly stable but driven by deliberate higher-risk pricing. **How funders are responding in 2026.** - **Tighter underwriting.** Minimum deposit thresholds raised at most top-50 funders (now $20K/mo, was $15K in 2024). - **Vertical exclusions.** Trucking-only or restaurant-only blocks at funders without specialty experience. - **Renewal-prioritization.** Roughly 65% of new originations at top-tier funders in 2026 are renewals of paying merchants vs. 50% in 2024. - **Pricing increases.** Average B-paper factor up from 1.32 (2024) to 1.36 (2026). - **Personal guarantee aggression.** PG enforcement more common at default, with COJ usage up. **What ISOs should infer from 2026 default trends.** - Funders are pickier and more conservative on first-time merchants. - Renewal submissions land better terms than first-position. - Sector specialization matters more — generalist funders are losing share to specialists. - Stacking detection is sharper; clean UCC files are non-negotiable. **Common confusions.** First, "MCA defaults are at crisis levels." Misleading — elevated 2–4 points vs. baseline, but funders remain solvent and capital is deploying. Second, "all sectors saw equal default increases." False — trucking and full-service restaurants drove most of the shift. Third, "default rate = loss rate." No — funders recover 30–50% of defaulted principal through COJ, PG, and litigation. Fourth, "default rates are public." Mostly no — only securitized funders disclose detailed cohort data in rating-agency reports. Fifth, "2026 trends will reverse in 2027." Uncertain — depends on tariff resolution, restaurant labor costs, and trucking freight recovery. ## Related terms - [MCA funder portfolio default rate by tier](https://fundnode.co/llms/glossary/mca-funder-portfolio-default-rate-by-tier) — A-paper portfolios default at 6–10%, B/C-paper at 10–18%, D-paper at 15–25%, E-paper at 25–40%; the gap drives the factor-rate spread between tiers. - [MCA funder default rate by industry (2026)](https://fundnode.co/llms/glossary/mca-funder-default-rate-by-industry-2026) — 2026 MCA default rates by industry: medical 4%, professional services 6%, retail 11%, restaurant 14%, beauty 12%, auto repair 10%, trucking 18%, construction 16%. - [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. - [MCA funder private-equity backed](https://fundnode.co/llms/glossary/mca-funder-private-equity-backed) — Many large MCA funders are owned by private equity firms, including Kapitus (Pine Brook Capital), Credibly (Flexpoint Ford), CAN Capital (Varadero Capital), and Rapid Finance (Rockbridge Growth Equity); PE backing typically drives capital availability, scale, and aggressive growth targets. ## Authoritative sources - [deBanked — 2026 Industry Default Reporting](https://debanked.com/) - [SBFA — Small Business Finance Association Industry Reports](https://www.sbfassociation.org/) --- Source: https://fundnode.co/glossary/mca-funder-portfolio-default-rate-trends-2026 (HTML version) Document: MCA funder portfolio default rate trends (2026) — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.