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Subprime
Also called sub-prime, C paper, D paper, high risk tier.
A lender-defined risk tier for borrowers who do not meet conventional credit standards, expressed in this market through shorter terms, higher factors and more frequent payments rather than a single rate.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
There is no legal definition and no shared threshold. Each funder sets its own tiers, commonly labelled A through D or prime through sub-prime, and populates them with its own mix of inputs: personal credit score, time in business, average daily balance, negative days, NSF count, industry, existing positions, and prior default history in the funder's own book or on shared industry databases.
The pricing response is not a rate adjustment. It is a structural one. Lower tiers get shorter terms, which raises the payment; daily rather than weekly debits, which tightens the cash-flow squeeze; smaller advances relative to revenue; and requirements like bank login verification or a personal guarantee with stronger enforcement terms.
A business can move tiers. Paying an advance to completion without an NSF, then renewing with the same funder, is the standard path to better terms, and it is one of the few genuine mechanisms in this market for reducing cost over time.
Where this one catches people
The tier reflects the funder's model, not an objective grade. The same file gets A paper from one shop and D paper from another because they weight negative days, industry and position count differently. A merchant told they are "only approved for high-risk pricing" is being told what one underwriting box concluded, and the honest test is whether the broker submitted anywhere else.
Where you will meet this term
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Subprime — common questions
What does subprime mean?
A lender-defined risk tier for borrowers who do not meet conventional credit standards, expressed in this market through shorter terms, higher factors and more frequent payments rather than a single rate.
Where does subprime catch people out?
The tier reflects the funder's model, not an objective grade. The same file gets A paper from one shop and D paper from another because they weight negative days, industry and position count differently. A merchant told they are "only approved for high-risk pricing" is being told what one underwriting box concluded, and the honest test is whether the broker submitted anywhere else.
Is subprime the same as an interest rate?
Subprime is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does subprime apply to?
Merchant Cash Advance, Working Capital.
Is there a worked example of subprime?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside subprime?
Factor rate, NSF fee, Negative days, Renewal, Time in business.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.