[miclog]

Looking for some advice... How do merchant cash advancers / alternative lenders delineate between "A" through "D" paper? Is there a clear market standard that is recognized across the industry or are they more specific to each lender? What are the key metrics when considering paper strength?

[Glenn]

Also new to the industry...this would be very helpful

[J.Celifarco]

credit/industry/strength of bank statements/volume/time in business

These are the main factors that the banks look at what differs from bank to bank is which of these factors are most important.

[MTY MSI]

I have this very same question myself & from what I've been able to determine in speaking w/ several direct funders the owner's FICO score/credit background is strongly factored into A paper approvals. Other than that B-D is based more on the business itself, I'd say for the direct funders w/ no minimum FICO requirement or something in the 500 range that would be C or D paper with the D paper being for tax liens, judgements, mediocre business credit, negative days ect.

I'd like to see someone post a confirmation or correction of what I think is true.

[jotucker1983]

Looking for some advice... How do merchant cash advancers / alternative lenders delineate between "A" through "D" paper? Is there a clear market standard that is recognized across the industry or are they more specific to each lender? What are the key metrics when considering paper strength?

Well, from the MCA industry as a whole, the paper grade is pretty much the same. However, this does not mean that the lender in question will "reward" the higher graded paper with lower rates like other lenders will. The best lenders use risk based pricing and will price the deal based on its grade.

From my perspective and experience, you have A - E graded paper:

A Paper: Usually over 650 fico, clean bank statements (low OD/NSFs), healthy bank balances (ending and average), no tax liens, no judgment liens, no recent bankruptcies, and no landlord/mortgage issues.

B Paper: Usually 600 - 640 fico, somewhat clean bank statements, somewhat healthy bank balances, might have a tax lien on a payment plan, might have a judgment lien on a payment plan (and the judgment is not from a prior MCA and not based on fraud), might have had a bankruptcy but it's dismissed/discharged now, might have landlord issues but can be resolved at closing.

C Paper: Usually 540 - 580 fico, bank statements might have some issues, might have a tax lien on a payment plan, might have a judgment lien on a payment plan (and the judgment is not from a prior MCA and not based on fraud), might have had a bankruptcy but it's dismissed/discharged now, might have landlord issues but can be resolved at closing.

D Paper: Usually 500 - 520 fico, bank statements might have some issues, might have a tax lien on a payment plan, might have a judgment lien on a payment plan (and the judgment is not from a prior MCA and not based on fraud), might have had a bankruptcy but it's dismissed/discharged now, might have landlord issues but can be resolved at closing.

E Paper: Under 500 fico, bank statements are bad, might have a tax lien but no payment plan, might have a judgment lien but no payment plan (and the judgment might be from a prior MCA and/or based on fraud), might have had a recent bankruptcy, might have landlord issues that can or cannot be resolved at closing.

[MikeGreen-Quarterspot]

Many on the forum view QuarterSpot as an A paper term loan. 9 or 12 months. We have a few criteria that are consistent with above with the exception of FICO.

We will underwrite business owners with a 550 or above. Main points after FICO for QuarterSpot are:

1. Years in Business. More=Better
2. Low NSF. No more than 5 in three months.

Other areas like balances, deposits and liens are consistent with what was reported above.

Hope this helps.

Mike

Mike@quarterspot.com

[1StopFunding]

Great breakdown Jo Tucker

[GoodCustomerService]

Every funder has a different grading system. It is based off the kind of deals they are looking for. What BFS or MCC consider a C paper deal may be considered an A or B deal by another funder. So you need to know first the difference between the funders in our space, their pricing and deal structures before understanding a grading system.

[mcaguru]

Every funder has a different grading system. It is based off the kind of deals they are looking for. What BFS or MCC consider a C paper deal may be considered an A or B deal by another funder. So you need to know first the difference between the funders in our space, their pricing and deal structures before understanding a grading system.

I agree! At cresthill Capital will dart a 90K wire across the country and pay Double Digit Commission on a file that some A paper Funding companies will black-list the ISO just for sending such a file (not exactly but you get the idea--if we feel we can collect a daily ACH from the merchant then most likely will make an offer!!!).