# MCA secondary market investor yields > Investors buying MCA paper on the secondary market in 2026 see 14–22% net yields on A-paper tranches and 22–35% on B/C paper, after defaults, recovery, and servicing. Risk-adjusted returns dropped 200–400 bps since 2022. A small but real secondary market exists for already-funded MCA receivables. Family offices, credit funds, and a handful of specialty institutional buyers purchase MCA paper from originating funders — either as whole-loan portfolios or as tranches of co-funded deals. The yields, risks, and dynamics in 2026 are distinct from the 2018–2021 environment. **Market structure.** - **Originators.** ~25 MCA funders actively syndicate or sell paper. The top 5 (Kapitus, Credibly, Rapid Finance, OnDeck, Reliant) account for ~60% of sold volume. - **Buyers.** Specialty credit funds (Atalaya, Victory Park, Pacific Investment Capital), family offices, and a small group of high-net-worth platforms. - **Volume.** Estimated $2–4 billion of MCA receivables traded in secondary in 2025 (industry estimate; no central reporting). - **Spreads.** Sellers receive ~85–93 cents per dollar of outstanding receivables, depending on paper grade and remaining term. **Yield ranges by paper grade (2026 expected gross yields before defaults).** | Paper grade | Gross factor return | Avg term | Annualized gross yield | Net yield (after default + servicing) | |---|---|---|---|---| | A-paper | 1.18–1.28 | 9 months | 24–37% | 14–22% | | B-paper | 1.28–1.40 | 8 months | 42–60% | 22–32% | | C-paper | 1.40–1.52 | 6 months | 80–104% | 25–35% | | D-paper / second position | 1.50+ | 5 months | 120%+ | -5 to +20% (highly variable) | **Default and recovery assumptions.** - **A-paper defaults.** 3–6% of portfolio dollar volume. - **B-paper defaults.** 8–14%. - **C-paper defaults.** 18–28%. - **Recovery on defaulted MCA.** 15–35% via collections / settlement / litigation. **Servicing economics.** Buyers either: 1. **Self-service.** Run own ACH platform, customer service, collections — fixed cost ~$150K/year per $25M outstanding. 2. **Pay seller to service.** Originator collects servicing fee of 1–2.5% of outstanding monthly. Most common arrangement. **Why yields dropped since 2022.** - **Capital inflow.** Family office allocation to private credit increased; MCA paper went from niche to "small but mainstream" private-credit subcategory. - **Underwriting improvements.** Funders' bank-statement models got better — fewer surprise defaults, but lower gross factors as competition compressed pricing. - **Regulatory tightening.** Disclosure laws and lawyer scrutiny on confessions of judgment and stacking reduced the wild-west pricing that drove 2018–2020 returns. - **Interest rate environment.** Senior credit facilities to MCA funders went from 5–7% (2021) to 9–12% (2024–2026), compressing originator margins. Less margin for syndication participants. **Typical investor commitments.** - **Minimum ticket.** $250K–$1M from family offices; $5M+ from institutional credit funds. - **Diversification.** Most buyers require minimum 200–500 individual MCA contracts per portfolio to smooth default variance. - **Term.** Investors typically take rolling 12–24 month exposures (paper amortizes naturally; new paper replaces it). - **Liquidity.** Effectively illiquid — no listed market; sales to other investors are negotiated and rare. **Risks specific to MCA secondary.** 1. **Concentration risk.** A single bad cohort (e.g., post-COVID hospitality 2020) can wipe out a year of returns. 2. **Originator risk.** If the originator fails, servicing handoff is messy. 3. **Litigation risk.** Recent New York and California court rulings re-characterized some MCAs as loans, exposing investors to usury liability. 4. **Regulatory risk.** Federal-level MCA regulation has been proposed but not enacted; could change economics. 5. **Reconciliation risk.** Federally-required reconciliation provisions reduce predictability of cash flow. **Buyer due diligence checklist.** - Originator's 3-year default-rate cohorts. - Composition of portfolio by industry, state, paper grade. - Servicing infrastructure quality. - UCC-1 filing perfection (all liens current). - Confession of judgment portfolio composition (now toxic in many states). - Recent litigation against originator. **Common confusion.** First, "MCA secondary is high-yield like junk bonds" — somewhat, but with much shorter duration and very different default dynamics. Second, "you can buy on a platform" — no public marketplace; transactions are bilateral. Third, "you get the factor as your return" — no; net yield is roughly 35–60% of gross factor after defaults and servicing. Fourth, "MCA returns are uncorrelated with equity markets" — only partially true; SMB default cycles correlate with broader recessionary signals. ## Related terms - [MCA secondary market trading](https://fundnode.co/llms/glossary/mca-secondary-market-trading) — MCA portfolios trade on the secondary market between funders at 60–90% of face value depending on portfolio age, paper grade, and default trajectory — providing liquidity to originators and investment opportunities to acquirers. - [MCA secondary market investor economics](https://fundnode.co/llms/glossary/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. - [MCA funder portfolio syndication](https://fundnode.co/llms/glossary/mca-funder-portfolio-syndication) — Portfolio syndication is when an MCA funder sells participation interests in their existing portfolio of funded deals to outside investors — typically family offices, hedge funds, or accredited individual investors — to free up capital for new originations while sharing economics on the underlying deals. Distinct from per-deal syndication; sells slices of aggregated portfolios rather than individual deal participations. - [MCA funder portfolio quality rating](https://fundnode.co/llms/glossary/mca-funder-portfolio-quality-rating) — MCA funder portfolio quality is rated by combination of default rate (under 8% = high quality), recovery rate (over 50% = strong), weighted average factor rate (1.20-1.30 = balanced), renewal rate (40-60% = healthy), and securitization rating (where applicable). --- Source: https://fundnode.co/glossary/mca-secondary-market-investor-yields (HTML version) Document: MCA secondary market investor yields — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.