I've been underwriting and servicing small-business capital long enough to remember when stips meant a fax machine and "real-time" meant same-week. The 2026 market doesn't look anything like that. It also doesn't look like the breathless predictions written in 2021. Here is what's actually changed on the ground, what we're seeing in our pipeline, our portfolio, and across the partners we work with.

1. Embedded capital has eaten the application form

The biggest structural change of the last 24 months is where originations start. In 2022, a typical funded deal began with a Google search, a broker call, or a paid lead. In 2026, an increasing share of small-business capital is offered inside the software the business already uses every day: Shopify Capital, Square Loans, Stripe Capital, Toast Capital, Intuit's QuickBooks Capital partnerships, Mindbody for studios, ServiceTitan for trades, and dozens of vertical SaaS platforms that have quietly added a "funding" button.

The 2023 Federal Reserve Small Business Credit Survey showed that nearly half of nonemployer applicants and roughly a third of employer firms applied through an online lender or marketplace, a share that has only grown. The implication for ISOs and traditional funders is uncomfortable: you are no longer competing only on price or speed; you are competing for shelf space inside someone else's product.

2. AI underwriting is the floor, not the moat

Three years ago, "AI underwriting" was a marketing claim. Today, the table stakes for a competitive funder look like this: instant bank-data retrieval via Plaid, MX, or Finicity; an XGBoost or gradient-boosted scorecard trained on the funder's own performance data; an automated bank-statement parser that classifies NSFs, true revenue, and inter-account transfers; and policy rules that approve or decline most clean files without a human touching them. We go deep on this stack in our article on AI in MCA underwriting.

What is changing in 2026 is where the leverage moves. The funders we see outperforming are not the ones with marginally better approval models; they are the ones using machine learning after funding: predicting which accounts are 30 days from going slow, which industries are softening, which renewal offers will be accepted, and which collections strategies recover the most dollars per labor hour. We cover the post-funding side in portfolio analytics for alternative lenders.

Neural network visualization representing machine learning models used in underwriting
Modern underwriting stacks combine bank-transaction classifiers, gradient-boosted scorecards, and post-funding behavioral models.

3. State disclosure laws have rewritten the buy-rate conversation

Between 2018 and 2024, nine states passed commercial-financing disclosure laws that fundamentally change how non-bank funders communicate price: New York (S5470-B), California (SB 1235), Virginia, Utah, Connecticut, Georgia, Florida (effective July 2023), Missouri, and Kansas. Each requires standardized disclosures (APR or estimated APR, total dollar cost, payment amount and frequency, prepayment policy) at the point of offer. We unpack the full state-by-state picture in our compliance guide for alternative finance.

The practical effect is that brokers can no longer pitch a deal purely on factor rate. Sophisticated merchants and accountants now compare offers on the same disclosure form. Funders who haven't invested in disclosure tooling (particularly the historical factor-rate-to-APR conversion logic) are losing deals on transparency alone.

4. Section 1071 is forcing fair-lending analytics into the mainstream

The CFPB's Small Business Lending Data Collection rule under Section 1071 of the Dodd-Frank Act, finalized in March 2023, modified in 2024, and still subject to ongoing litigation, requires covered financial institutions to collect and report 25+ data points on small-business credit applications, including demographic information about the applicant's principal owners.

Even though the compliance dates have shifted and exemptions still apply to some non-depository funders, every serious lender we work with is now building the data infrastructure as if they were covered: standardized application fields, demographic capture flows, decisioning audit trails, and disparity-analysis dashboards. The reason is simple: if you ever scale to a depository acquirer, sell paper to a bank, or face a state enforcement action, you want that data already clean.

5. The generalist funder is losing to the vertical specialist

Five years ago, a generalist MCA shop could underwrite a restaurant, a trucking outfit, a medical practice, and an HVAC contractor off roughly the same scorecard. That model is breaking. Restaurants in 2026 have very different seasonality and chargeback profiles than they did pre-COVID. Trucking has been through a multi-year freight recession. Medical receivables behave differently than they used to because of payer-mix changes.

The funders growing fastest in our network are ones who have picked two or three verticals and gone deep, building industry-specific underwriting overlays, custom data integrations (e.g., dispatch software for trucking, EHR systems for medical), and renewal motions calibrated to the cash-flow patterns of each segment. The economics are simply better: lower defaults, higher renewal rates, and lower customer acquisition cost from word-of-mouth inside a tight industry.

6. Build-vs-buy is settling decisively toward buy

Five years ago, every funder of meaningful scale wanted to own their stack. Today the math has flipped. A modern white-label platform delivers underwriting, servicing, ACH processing, ISO portals, investor reporting, and disclosure generation as a configured product. Building the same in-house is a 24-to-36-month, $3M-to-$8M project, and that's before you account for ongoing compliance updates, integration maintenance, and the security audits that institutional capital partners now require.

We cover this trade-off in depth in our piece on white-label as a competitive advantage. The short version: if your differentiator is your origination engine, your underwriting policy, or your capital structure (not your CRUD app for servicing), buying the platform and owning the IP that matters is the right call. See how our white-label platform works.

7. Borrower experience is the new pricing lever

Speed, transparency, and self-service are no longer perks; they are baseline expectations from any business owner who has used Stripe, Plaid, or Ramp. In our portfolio we see measurable willingness-to-pay differences (small but real) for funders who offer: a mobile-first application that pre-fills from bank data, an instant or near-instant decision, a clear total-cost disclosure, and a self-service portal where merchants can view their balance, download statements, and request renewals.

Conversely, every funder we have audited has at least one place where their UX leaks deals, usually around stip collection, signing (DocuSign abandonment), or the gap between approval and first funding. Our originations product closes those leaks by design.

What this means for your 2026 plan

If you take only three things away from this piece, take these:

  1. Treat embedded distribution as a strategic question, not a marketing one. Decide whether you are a wholesale capital provider (selling paper to platforms) or a direct-to-merchant brand, and align everything else to that.
  2. Stop describing AI underwriting as a feature. Describe what it lets you do that competitors can't: typically faster decisions on a wider risk band, or better portfolio surveillance after funding.
  3. Build your fair-lending and disclosure data infrastructure now. The cost of doing it before you need it is a fraction of the cost of doing it under an enforcement action or during diligence for institutional capital.

We are biased, but we believe most of these capabilities are now better bought than built. If you want to compare notes on how your stack lines up against what we see across the partners we work with, book a working session with our team.

Frequently asked questions

Is the MCA industry still growing in 2026?

Yes, but unevenly. Origination volume in the broader alternative finance category continues to expand, driven primarily by embedded products and revenue-based financing. Pure standalone MCA volume has been flatter, with share consolidating toward funders who have either embedded distribution or a defensible vertical niche.

How does Section 1071 affect MCA funders specifically?

The rule applies to covered financial institutions making at least 100 covered originations annually, and a true commercial sale of receivables (an MCA) is generally captured as a covered transaction. Compliance dates are tiered and have been adjusted by litigation, so consult counsel for your specific size tier, but the practical answer is most serious MCA funders are preparing as if they are in scope.

Which states require APR disclosure for MCAs?

As of 2026, NY, CA, VA, UT, CT, GA, FL, MO, and KS have commercial-financing disclosure regimes that require some form of APR or estimated APR for MCA-type products at the point of offer. Each statute defines covered products and APR methodology slightly differently.

What does 'embedded capital' actually mean for a traditional funder?

Practically, it means a small business often sees a funding offer inside their POS, accounting, or vertical SaaS tool before they ever search for capital. To compete, traditional funders either need their own direct-response brand (paid + content + referral), wholesale relationships where they fund a platform's offers, or both.

Sources & further reading