# MCA secondary market investor economics

> Secondary-market investors buy seasoned MCA paper from originating funders at 60–85 cents on the dollar of remaining receivables, earning 18–35% net yield. The market reached an estimated $4–6B in 2025 vs. $30B+ primary originations.

The MCA secondary market — where originating funders sell already-funded MCA contracts to outside investors — has matured into a real asset class. Understanding investor economics helps merchants and brokers see where the capital comes from.

**Why originators sell.**

1. **Capital recycling.** Selling a $1M portfolio at 75 cents = $750K, redeployed into new originations at 25–40% target net yield. Holding the portfolio earns ~20–25% but ties up capital for 6–18 months.
2. **Risk transfer.** Move concentration risk (e.g., a single $250K deal) off the books.
3. **Earnings smoothing.** Booking a one-time gain on sale vs. recognizing income over 12 months.
4. **Liquidity.** Funders backed by hedge funds or family offices face quarterly distribution requirements.

**Who buys.**

- **Family offices.** Long-duration capital, comfortable with 25%+ target yields on small-business credit.
- **Specialty credit hedge funds.** Run by alums of Marathon, Pine River, Apollo. Concentrated in NYC and South Florida.
- **High-net-worth individuals.** Often through aggregator platforms with $250K minimums.
- **Private credit BDCs.** A few publicly-traded BDCs (e.g., Hercules Capital, Trinity Capital) hold MCA receivables in their portfolios.
- **Foreign capital.** Israeli, Canadian, and Australian family offices have been active 2023–2026.

**Pricing mechanics.**

A typical secondary trade prices off three variables:
1. **Remaining receivables.** What is left to collect on the contract.
2. **Days into contract.** Performance through Day 60 reveals risk; later trades price higher (closer to par).
3. **Industry / state / paper grade.** Restaurants in NY trade weaker than HVAC in TX.

Typical 2026 pricing grid:

| Days into contract | Performance | Price (% of remaining) |
|---|---|---|
| 30 days | No defaults | 60–70% |
| 60 days | No defaults | 72–82% |
| 90 days | No defaults | 80–90% |
| Any | One missed payment | 50–65% |
| Any | Reconciliation in progress | 40–55% |
| Any | In default / litigation | 10–30% |

**Investor net yield math.**

Investor buys $100K of remaining receivables for $75K. Collects $90K (assumes 10% loss from defaults). Net profit: $15K on $75K invested over 6 months = ~40% annualized. After servicing fees (typically 1–3%), net yield is 35%+.

**Servicing.**

Originating funder typically continues to service (collect, manage reconciliations, handle defaults) for 1–3% of collections. Some buyers take on servicing themselves to control the merchant relationship.

**Risks for investors.**

1. **Collection deterioration.** Original underwriting was on point-in-time bank statements; performance over 12 months may diverge.
2. **State law evolution.** California / NY disclosure laws and emerging usury recharacterization risk make 2024+ vintages riskier than 2018 vintages.
3. **Originator bankruptcy.** If the originating funder files Chapter 11, the chain of title to receivables becomes contested.
4. **Stacking deterioration.** Merchants who took additional advances after secondary trade are higher default risk; secondary buyers often have no visibility.

**Market size (2025 estimates).**

Industry sources estimate $4–6B in annual secondary MCA trades, vs. $30–35B in primary originations. The ratio (~15%) is rising as more funders adopt capital-recycling models.

**Common confusion.** First, "secondary market" is sometimes confused with "buyer-of-deals" — these are different. Buyer-of-deals buys APPLICATIONS pre-funding; secondary market buys CONTRACTS post-funding. Second, secondary market is not securitized — these are bilateral trades, not bond issuances (though a few funders have explored MCA ABS deals). Third, merchants are usually unaware that their MCA contract has been sold; the servicing funder remains the merchant-facing party.

## Related terms

- [MCA buyer of deals — secondary market](https://fundnode.co/llms/glossary/mca-buyer-of-deals-secondary-market) — The MCA secondary market is the network of investors and platforms buying MCA receivables from originating funders: individual deals, pool purchases, and portfolio acquisitions at 70–95 cents on the dollar depending on performance and remaining life.
- [MCA buyer-of-deals vs. broker](https://fundnode.co/llms/glossary/mca-buyer-of-deals-vs-broker) — A broker submits a merchant's application to multiple funders and earns commission on whoever funds. A buyer-of-deals purchases the full submission from the broker (typically $200–$2,000) and submits to their own funder network for their own commission.
- [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.
- [MCA funder portfolio size](https://fundnode.co/llms/glossary/mca-funder-portfolio-size) — The total dollar value of active MCA advances on a funder's books; benchmarks: micro-funders <$10M, mid-market $10M–$250M, large $250M–$1B, mega-funders $1B+ (Credibly, Rapid Finance, Kapitus, Forward Financing each cross $1B as of 2026).

## Authoritative sources

- [deBanked — Secondary Market Coverage](https://debanked.com/)

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Source: https://fundnode.co/glossary/mca-secondary-market-investor-economics (HTML version)
Document: MCA secondary market investor economics — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.