# 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. A warehouse line of credit is the operational lifeblood of any direct MCA funder. It's a revolving secured facility — typically $25M to $500M — provided by a bank, BDC, or private credit fund, against which the MCA funder borrows to fund advances. As advances are repaid or sold (via syndication or securitization), the line is paid down and capacity is freed for new originations. As of 2026-06-28, warehouse pricing has tightened to SOFR+400 to SOFR+800 depending on funder size and credit quality. **The mechanics — how a warehouse facility actually works.** 1. **Funder originates an advance.** $100K to Restaurant X at 1.32 factor. 2. **Funder draws from the warehouse.** Borrows ~$80K (an 80% advance rate against the $100K originated principal). The advance becomes collateral. 3. **Daily ACH collections.** $480/day from the restaurant flow into a lockbox account controlled by the warehouse lender. 4. **Collections sweep to repay the warehouse.** Pro-rata, the warehouse lender takes its share; the funder takes the residual (servicing fees + origination fees + factor margin). 5. **Capacity re-revolves.** As the advance amortizes, warehouse capacity is freed for new originations. 6. **Take-out via syndication or securitization.** When the pool reaches critical size ($100M–$300M), the funder either syndicates participations or securitizes the pool, paying down the warehouse and freeing 100% of capacity. **The economics — what the warehouse costs.** A representative 2026 facility: - **Size:** $100M revolving. - **Advance rate:** 80% of eligible MCA principal balance. - **Interest rate:** SOFR + 500 bps (so ~10% all-in at mid-2026 SOFR of ~5%). - **Commitment fee:** 0.50% on undrawn amount. - **Upfront fee:** 1.0% at closing ($1M on $100M facility). - **Eligibility criteria:** A or B paper only; no advances over $250K; no merchants in pending litigation; no syndicated participations. - **Covenants:** Maximum default rate 8% by vintage; minimum net worth $25M; debt-service coverage ratio 1.25x. The funder's economics on a $100K advance: collects $32K in fees, pays warehouse ~$5K in interest over the 10-month life, nets ~$15K after origination + servicing costs (ISO commission, bank statement vendor fees, default reserve). The warehouse interest is the second-largest cost line after ISO commission. **Who provides MCA warehouse facilities in 2026.** - **Banks (since ~2022):** Synovus, BankUnited, Western Alliance, City National Bank — smaller-funder facilities $25M–$100M at SOFR+400 to SOFR+550. - **BDCs and specialty credit funds:** Hercules Capital, Owl Rock, Atalaya Capital, Victory Park Capital — mid-sized facilities $50M–$300M at SOFR+500 to SOFR+700. - **Private credit megafunds:** KKR Credit, Apollo, Blackstone Credit — large-funder facilities $200M+ at SOFR+450 to SOFR+650. - **Foreign banks:** Several UK and Israeli banks provide MCA warehouse facilities to U.S. funders at competitive pricing. **The covenant package — what trips funders.** Standard warehouse covenants: - **Default rate triggers.** If portfolio default rate exceeds 8% by vintage, warehouse advance rate drops to 60% (or facility is frozen for new draws). - **Concentration limits.** Single-merchant, single-industry, single-state caps. Breach forces the funder to "cure" by paying down or substituting collateral. - **Servicing standards.** Servicer rating from a rating agency (e.g., Kroll's Special Servicer rating); missed reporting deadlines trigger default events. - **Financial covenants on the funder.** Minimum tangible net worth; minimum liquidity; debt-to-equity caps. - **MAC clauses.** Material adverse change provisions — warehouse can be frozen if the funder loses a major customer or has a regulatory event. **What happened in 2024–2025 (the warehouse crunch).** When private credit markets tightened in 2024, several MCA warehouse lenders raised pricing 200–400 bps and tightened eligibility (no C-paper, no advances over $200K, geographic concentration cuts). At least three mid-size funders had warehouses frozen and were forced to slow originations 40–60% for two quarters. The market normalized by Q2 2025 but pricing reset to a higher baseline. **Strategic insight — the warehouse-to-securitization ladder.** The capital-stack progression for a scaling MCA funder: 1. **Equity-only (year 1):** $5M–$20M from founders + early investors. Origination capacity ~$15M/year via recycled cash. 2. **First warehouse (years 2–3):** $25M–$50M from a BDC or specialty lender. Capacity ~$75M/year. 3. **Expanded warehouse (years 3–5):** $100M–$300M from multiple lenders. Capacity $300M–$500M/year. 4. **Securitization (year 5+):** $200M+ ABS issuance, paying down warehouse and rotating to lowest-cost capital. Funders who skip the warehouse-and-securitize ladder either stay equity-constrained (small) or shift to white-label/referral models (low capital intensity). **Common confusions.** First, "Warehouse interest is the same as the merchant's APR." False — warehouse is the funder's cost of capital (~10%); merchant APR-equivalent is 50–100%. The spread is the funder's gross margin before defaults and overhead. Second, "The warehouse owns the advances." Technically the warehouse has a security interest, not ownership. The funder owns the advances and services them. Third, "All MCA funders have warehouses." False — pure-syndication funders, white-label operators, and processor-financing arms (Square Capital, Toast Capital) don't need warehouses; they're funded by parent-company balance sheets. **The 2026 takeaway.** Warehouse capacity, pricing, and covenants determine which MCA funders can scale. When warehouses tighten, the industry consolidates; when they loosen, new entrants flood in. Monitoring warehouse market conditions is the single best leading indicator of MCA funder competitive dynamics. ## Related terms - [MCA funder portfolio securitization (detailed)](https://fundnode.co/llms/glossary/mca-funder-portfolio-securitization-detailed) — The process of pooling thousands of MCA advances into a bankruptcy-remote SPV, issuing rated ABS notes against the pool, and selling them to institutional investors at 6–12% coupons — unlocks the cheapest capital available to MCA funders. - [MCA funder portfolio syndication economics](https://fundnode.co/llms/glossary/mca-funder-portfolio-syndication-economics) — MCA portfolio syndication in 2026 lets originating funders sell tranches (typically 20–80%) of advances to investor partners at 12–22% target IRR, freeing capital for new originations while sharing default risk across investor pool. - [MCA funder private equity backers (2026)](https://fundnode.co/llms/glossary/mca-funder-private-equity-backers-2026) — Private equity backers of MCA funders in 2026 include Apollo (Foundry/Newtek), Blackstone Credit, Ares (Funding Circle holdings), KKR (Behalf), Carlyle (Reliant), HPS Investment Partners, and Atalaya Capital — typically holding majority equity in $100M+ originators. - [MCA funder fund structure (typical)](https://fundnode.co/llms/glossary/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. ## Authoritative sources - [Hercules Capital — Specialty Lending Strategies](https://www.htgc.com/) - [S&P Global — Private Credit Market Outlook 2026](https://www.spglobal.com/) --- Source: https://fundnode.co/glossary/mca-funder-warehouse-line-of-credit (HTML version) Document: MCA funder warehouse line of credit — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.