Can I Settle My MCA Before I Miss a Payment?

Shourt version: yes, you can. But “settle” probably doesn’t mean what you think it means. Discounts in your MCA come from leverage, and that’s not a straightforward answer on what that means.

The thing you’re really asking

When people type this question into Google it’s usually two different questions crammed into one.

Question one: “Can I get them to knock 40% off the balance while I’m still current?” Mostly no.

Question two: “Can I fix this before it blows up, so I don’t end up shutting down my company?”
Yes. A hundred percent yes, and right now is the best moment you will ever have to do it.

Those aren’t the same move. One is a settlement – a reduced payoff. The other is a restructure – lower payment, more time, breathing room. Many people are confused, and will make the wrong move because they don’t know what they’re doing – especially if they call a debt settlement company who convinces them to default on their existing MCA’s when they didn’t need to do that.

Cold Math

You owe the lender, say, 80k. The lender is pulling 1,100 bucks a day. From the lenders point of view when they’re looking at your request, you are a performing MCA on their books. You are a business that pays out every morning. Why would the lender cut you a deal when the money is already landing in their account, every morning, like clockwork?

MCA settlements are real, but those don’t happen automatically. They happen because the MCA lender starts running their own calculations on what happens if the MCA enters into a default status, and what the lender has to do in order to collect the funds. They happen because the funder runs the OTHER calculation. The one where the lender asks himself: do I chase this guy through court for 15 or 25 grand in legal fees over 6, 8, 12 months and maybe collect, or do I take guaranteed cash today and close the file?

That calculation only turns in your favor when there’s actual risk the lender collects nothing.

So what CAN you do while you’re still paying

Plenty, actually.

Restructure the payment. Funders renegotiate MCA deals every day, they just don’t advertise it because the current terms favor them. Also if lenders make it publicly known that they’ll renegotiate on a whim, it would break their entire business model. A performing borrower who calls up and says “revenue dropped 30%, I need the daily cut to 600 or I’m gonna break” is worth more to them alive than dead. Ask for a real reduction, 40 to 50% off the daily, stretched over a few extra months. Virtually all MCA agreements have a reconciliation clause, and this is a starting point for a conversation with a lender when you are suffering, and unable to keep up with your daily and weekly MCA payment.

Use your reconciliation clause if you have one. This is the one nobody reads or even knows about. A lot of MCA contracts – the ones structured as a true purchase of future receivables – have a clause in their agreement that says if your sales drop, you have the right to have the payment adjusted down. Remember, in the agreement they are taking a fixed % of your revenue, in the form of a daily/weekly ACH. If your revenue goes down 10%, then the daily ACH fixed amount has to go down proportionate to it. Pull your agreement. Read it. If it’s in there, you invoke it with documentation, declining bank statements. They’re supposed to honor it.

Buy yourself out, if you’ve got cash. Tax refund, a slow-season war chest, a family loan, a real line of credit. Some funders WILL take a lump-sum payoff at a modest discount even while you’re current, because cash today beats the time-value of dribbled-out daily pulls.

The trap

There’s a whole industry of “relief” business debt companies whose entire model is simple: stop paying the lender, on purpose, to create leverage. Redirect the money into our escrow account, we’ll sit on it three to six months while your funders get desperate, then we swoop in and settle for pennies. The scammy debt relief companies mentioned above will not establish any contact with the lenders, at all, and meanwhile you get UCC liens sent to your clients, and payment processors, and even potential lawsuits filed, all within 30 days. This is not an exaggeration.

Can you settle before you miss a payment? You can open the conversation, yes. But while you’re current, “settle” realistically means restructure the terms or buy out at a soft discount – not 35 cents on the dollar.

The actual play while you’re current:

1. Pull every agreement. Find the reconciliation clause. Find the COJ. Find the personal guarantee. Study it, and understand exactly what you’ve gotten yourself into. This is a high stakes situation.
2. If you’ve got the cash, float a lump-sum buyout. Some lenders will take this.
3. If you don’t, ask for a real restructure – lower daily, longer term – in writing, before you miss anything. Leverage the reconciliation clause in the agreement to ask for it. Lower revenue, means lower payments.
4. Whatever you do – do NOT let some guy on the phone talk you into stopping payment to “build leverage.” Most business debt relief companies are scams, where you don’t even know who owns the company. This is by design, they don’t care if you fail or succeed.

Don’t ghost the funder. Don’t lie to the lender, be frank. Do not send altered bank statements, and commit wire fraud. A merchant who communicates, who says here’s my revenue, here’s my problem, here’s my offer – that merchant is a lot less likely to get a UCC lien slapped on him than the one who goes silent.

At Delancey Street we take a proactive approach to helping clients who are struggling with their daily and weekly MCA payments. If you’re struggling, we can help you by helping you enforce the reconciliation clause.