Portfolio Concentration
Portfolio concentration measures the distribution of MCA exposure across industries, geographies, broker channels, and merchant sizes — managed through limits to prevent catastrophic loss from single-segment stress.
Why This Matters
Concentration analysis: percentage of portfolio by industry (restaurants, retail, services), geography (state/region), broker source, merchant size band, and product variation. Healthy MCA portfolios maintain diversification — typical limits include 10-15% maximum industry concentration, 15-20% maximum geographic concentration, 15% maximum single broker concentration. Concentration risk realized: COVID-era restaurant/hospitality concentrations produced 30-40% loss rates for over-concentrated portfolios while diversified portfolios maintained 10-15% loss rates.
Frequently Asked Questions
Frequently Asked Questions
What concentration limits are typical?
Industry: 10-20% maximum per industry. Geography: 15-20% per state. Broker source: 10-15% per broker. Merchant size: balanced across small (~30%), medium (~50%), large (~20%) bands.
How is concentration risk monitored?
Daily portfolio reporting tracks all concentration dimensions against established limits. Monthly reviews identify emerging concentration trends. Capital provider covenants typically require concentration limit compliance as condition of facility availability.