In the fast-paced world of Merchant Cash Advances (MCA), understanding how lenders
categorize risk and structure their deals is crucial. Whether you’re a business owner
exploring funding options, a broker matching merchants to lenders, or an industry
professional aiming to deepen your expertise, knowing the distinctions between A, B, and C
Paper deals can help you make informed decisions.
At Money-360, we break down these MCA classifications, their typical terms, qualifications,
and provide real-world examples to help you understand which tier is right for your unique
financial situation or your client’s business needs.
Understanding MCA Paper Grades: The Basics
In MCA terminology, “Paper” refers to the quality of the deal based on the merchant’s
financial health, risk profile, and repayment reliability. Lenders classify MCA applications into
three categories:
● A Paper: Merchants with low risk and strong financial health.
● B Paper: Moderately risky merchants, typically stable but with some financial
challenges.
● C Paper: High-risk merchants with weaker financial profiles or urgent funding needs.
These classifications directly influence the deal terms such as funding amounts, repayment
periods, rates, and renewal options.
A Paper Deals: Stability and Attractive Rates
Who Qualifies?
“A Paper” merchants typically have:
● FICO scores over 700
● Consistent monthly revenue ($50,000+ on average)
● Low or manageable debt-to-income ratios
● Stable business operations (2+ years)
● Minimal negative banking activities (e.g., few NSF charges)
Typical Terms:
● Larger funding amounts, often exceeding $100,000
● Longer repayment periods (6–18 months)
● Lower factor rates (typically between 1.10–1.30)
● Flexible repayment options
Example Scenario:
ABC Retail LLC has been in business for five years, generating $120,000 in monthly
revenue with a 730 credit score. This financial stability qualifies them for an A Paper deal,
offering $150,000 at a 1.18 factor rate, payable over 12 months with manageable daily
payments.
B Paper Deals: Balancing Risk and Opportunity
Who Qualifies?
“B Paper” merchants may have:
● Average credit scores ranging from 600–700
● Monthly revenue between $20,000–$50,000
● Some banking challenges (e.g., occasional overdrafts)
● At least one year of operation
Typical Terms:
● Funding amounts typically between $25,000–$100,000
● Repayment periods (3–12 months)
● Factor rates ranging between 1.25–1.45
Example Scenario:
XYZ Café has been in operation for two years, averaging $40,000 in monthly revenue. Due
to seasonal fluctuations, their credit has dropped to 650, and they occasionally experience
overdrafts. As a B Paper merchant, they can secure a $50,000 MCA at a 1.35 factor rate,
repayable over 8 months.
C Paper Deals: Higher Risk, Higher Cost, but Vital
Funding
Who Qualifies?
“C Paper” merchants typically face:
● Low credit scores (typically under 600)
● Inconsistent or low monthly revenue (often under $20,000)
● Frequent negative banking activities
● Industries deemed high-risk by MCA lenders (e.g., seasonal businesses,
construction)
Typical Terms:
● Smaller funding amounts ($5,000–$50,000)
● Shorter repayment periods (3–6 months)
● Higher factor rates (1.40–1.60+)
Example Scenario:
QuickFix Auto Repairs, a young automotive shop, has been operating for eight months and
generates around $18,000 monthly in revenue. With a credit score of 570 and limited
operational history, they qualify for a C Paper deal, receiving a $20,000 MCA at a 1.50 factor
rate, repayable within four months.
Choosing the Right MCA Tier: Key Considerations
- Understand the Merchant’s Immediate Needs
● C Paper: Ideal for businesses needing fast access to capital for urgent needs like
inventory or operational costs. Although it comes at a higher cost, it provides quick
funding.
● B Paper: A balanced choice for businesses needing immediate capital, with
moderate costs and repayment flexibility.
● A Paper: Best for businesses with strong financial health, seeking lower-cost funding
with longer repayment terms, perfect for expansion or larger projects.
Pitch to Merchants:
“Is your business facing urgent cash flow issues? C Paper might be the quickest way to
access capital, but it comes with higher costs. If your need is immediate but your financials
are stable, B Paper could offer a better balance. A Paper is ideal for long-term growth if
your business has strong financial health.”
- Assess Long-Term Growth Potential
● B Paper: Allows businesses to improve their credit profile over time, paving the way
for better deals in the future.
● A Paper: Perfect for those focused on long-term growth, offering the most
affordable terms and enabling access to larger funds when needed.
Pitch to Merchants:
“Looking for long-term growth? B Paper can help now while positioning you for A Paper
deals down the line. If you’re focused on growth, A Paper is the best option for the future.”
- Evaluate Risk Tolerance
● C Paper: For high-risk businesses needing funding urgently but at a higher cost.
● B Paper: For moderately stable businesses that can handle moderate risk and cost.
● A Paper: For low-risk businesses with strong financial profiles, providing the best
rates and terms.
Pitch to Merchants:
“How much risk are you willing to take? If you’re comfortable with higher costs for quick
funding, C Paper may be your option. B Paper offers a balanced approach, while A Paper
provides the most cost-effective deal if your business is in excellent shape.”
- Cost vs. Repayment Affordability
C Paper deals come with higher factor rates and shorter repayment periods, which might
strain cash flow.
B Paper is ideal for those who need immediate funding but want more manageable
repayment options.
A Paper is the most affordable in terms of repayment, with lower factor rates and longer
periods, ideal for businesses looking for lower daily obligations.
Pitch to Merchants:
“Can your business handle higher repayments? C Paper offers quick access, but it’s costly.
B Paper is a good compromise, with manageable repayments. A Paper is the most
affordable and best if you want to minimize repayment strain.”
- Consider the Merchant’s Industry and Business Type
C Paper is suitable for high-risk industries, startups, and businesses with less-than-ideal
financials.
B Paper works for businesses with some challenges but stable operations.
A Paper is for established businesses with consistent revenue in low-risk industries.
Pitch to Merchants:
“If your business is in a high-risk industry like construction or retail, C Paper might be the
best choice. B Paper works well for businesses with stable cash flow but some financial
challenges, while A Paper is for low-risk industries with solid, consistent revenue.”
- Evaluate the Merchant’s Credit Profile
A Paper deals require excellent credit, stable revenue, and a clean financial history.
B Paper deals are for businesses with moderate credit and some financial issues.
C Paper is suitable for businesses with poor credit or irregular cash flow.
Pitch to Merchants:
“Your credit profile is crucial. If you have strong credit and financial stability, A Paper offers
the best terms. If you’re in transition and working on improving your credit, B Paper may
provide the funding you need now while you build towards better terms.”
Hypothetical Case Studies: Evaluating Your Options
Case Study 1: Sarah’s Bliss Salon (B Paper)
Sarah owns Bliss Salon and averages $30,000 in monthly revenue with a 650 credit score.
She wonders whether to wait for better credit (potentially qualifying as A Paper) or proceed
with a B Paper MCA.
Money-360’s Perspective:
Sarah needs immediate funding to purchase new equipment. Although she may qualify for
A Paper in a few months, waiting could result in lost business opportunities. Securing a B
Paper MCA for $50,000 at a 1.35 factor rate now would help her grow and position her for
better financing later.
Case Study 2: Tom’s QuickFix Auto Repairs (C Paper)
Tom’s automotive shop, QuickFix Auto Repairs, is just eight months old, with $18,000 in
monthly revenue and a 570 credit score. He needs funding urgently for operational costs.
Money-360’s Perspective:
Despite a high factor rate of 1.50, Tom qualifies for a C Paper deal and receives $20,000 in
funding. This helps stabilize cash flow during a difficult season, and steady repayments
could improve his credit, leading to better funding options in the future.
Case Study 3: Emily’s Artisan Bakery (B Paper to A Paper Transition)
Emily has been operating Emily’s Artisan Bakery for three years, generating $45,000 in
monthly revenue. Her credit score is 675. She needs funding for expansion.
Money-360’s Perspective:
Emily secures a B Paper MCA for $80,000 at a 1.30 factor rate, repayable over 10 months.
After six months of successful repayments, her credit score improves, and she qualifies for A
Paper funding for future growth.
Case Study 4: Marcus’s Fitness Studio (A Paper)
Marcus’s fitness studio is well-established, with $70,000 in monthly revenue and a 720 credit
score. He needs funding for expansion.
Money-360’s Perspective:
Marcus qualifies for an A Paper deal with $200,000 at a 1.15 factor rate. This favorable deal
allows him to expand without significant financial strain.
Conclusion: Making an Informed Decision
Clearly understanding MCA paper grading helps merchants, brokers, and MCA
professionals align expectations realistically and leverage funding strategically. Whether
you’re positioned as A, B, or C Paper, success hinges on choosing the right lender and
structuring your deal carefully.
At Money-360, we offer tailored support, transparent assessments, and reliable partnerships
to guide you towards the optimal funding solution. Whether you’re just starting with C Paper
or looking for more favorable terms with A Paper, we’re here to help.
Ready to explore your options further?
Visit Money-360.com today for personalized advice and transparent insights tailored
specifically for your business funding needs.
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