Can’t keep up with my MCA payments – what are my options before I default?

TL;DR: Before you miss a payment you have one real piece of leverage most business owners in a situation like yourself never use: reconciliation clause. Use it right and you buy room to figure out your legal situation, and exactly to figure out what is going wrong. Use it wrong, or skip it, and you walk into default.

We’re gonna skip the part where we list out twelve options like a brochure. You can Google “MCA relief options” and get a wall of the same recycled SEO content. Settlement, restructuring, refinance, bankruptcy, blah blah. Sure. Those exist, and in theory, they’re all potential ideas, but not all of them are actually applicable. Virtually everyone thinks they are going to qualify for them – but it’s not simple.

Here’s the thing nobody says out loud in any SEO article you read on the internet: 90% of what determines how this goes for you happens before you default, and it comes down to one mechanism people barely understand.

The reconciliation clause in your contract literally gives you an out

Pull up the agreement you signed with an MCA lender when you took the MCA on day 1. Right now. Find the section that says “reconciliation” or “true-up” or “adjustment of daily/weekly amount.” Almost every MCA has one, because legally that’s the lynchpin that keeps the whole thing from being a loan legally speaking. The funder bought your receivables at a discount, supposedly. Receivables go up and down. So the contract has to let you adjust the payment when revenue drops otherwise it’s just a fixed-payment loan with a 200% APR and now it’s usury and now the funder’s got a real problem. No funder wants their MCA reclassified as a loan, a usurious loan to say the least.

That clause is your leverage when dealing with an MCA, where you think you’re about to default. Often, the reconciliation clause is the first line of defense, and it’s something which is invoked, too late.

Here’s how it usually reads: if your revenue drops, you submit your bank statements or statements, and they recalculate your daily ACH down to match the agreed percentage of your actual receipts. In theory it’s automatic-ish. If you show the evidence, it’s supposed to be a formulaeic calculation that automatically happens. It’s not even meant to be a question mark.

Why funders slow-walk it (and what that tells you)

Funders hate reconciliation. It cuts their cash flow. So they bury the info, and bog you down if you invoke the reconciliation process. They want it in writing, then they want “three months” of statements, then the guy who handles it is “out,” then they tell you the request is “under review” while they keep taking the full amount the entire time.

That process of stalling your request is the whole game for an MCA lender. They know you’re struggling, and it means if they wait long enough, you might default before they have to honor the reconciliation request. They’re betting you’ll either give up, or you’ll bounce a payment first, and a bounced payment in most of these contracts is an event of default that deletes the reconciliation right entirely. The second you default, the clause you were trying to use is gone. They escalate to the confession of judgment, they file, they freeze your accounts, and the whole “we’ll work with you” tonality they have rapidly evaporates.

So the timing is everything. You reconcile while you’re still current. Not after the first time you miss an ACH debit. The order of operations is the entire ballgame .

The fork, and you have to be honest with yourself about which side you’re on

Okay. You have two potential situations, and they need completely different moves.

Situation A: Your revenue actually dropped. Sales are genuinely down, the statements prove it. Then reconciliation isn’t a stall, it’s a legit contractual right and you should envoke it off immediately, in writing, certified, with the bank statements attached, citing the exact clause by section number. Make it a paper trail. Certify mail it, and email it, if you have to. Make the necessary phone calls as well, to make sure it’s on everyones radar. Because if MCA lenders ignore a valid reconciliation request and keep over-charging you, that’s a breach on their side, and now if this ever goes to court your lawyer has them. You flipped the script, they’re the one who broke the deal, they are in default of the agreement.

Situation B: Revenue’s fine, you’re just stacked. You took a second, a third, a fourth position, the daily debits stacked up past what the business generates in revenue, and no single funder is “owed” a reconciliation because each one individually is technically affordable, it’s the pile that’s killing you. Reconciliation won’t save you here and pretending it will just burns time. This is a restructuring or settlement situation now.

Most people are in Situation B and tell themselves they’re in Situation A. Be honest. If you keep pretending it’s a revenue dip when it’s actually a stacking problem, you’re wasting your time, and losing money all at the same time, in addition to losing potential opportunities to save your business.

What to actually do this week

If you’re still current, here’s the move, in order:

1. Stop with the calls. Everything in writing. The phone call is where promises get made and then “never happened.” Email. Certified mail for the important stuff.
2. Send the reconciliation request if Situation A – section number, statements attached, specific recalculated number you’re requesting. Assert a contractual right, just like the lenders will assert if you default on the MCA agreement.
3. Map the whole stack if Situation B – every position, daily/weekly amount, balance, the COJ status, which states they filed in.
4. Do NOT just revoke ACH access and go dark. I know that’s the instinct many business owners have, they think they can close the account, cut them off, breathe. It feels like control, but it’s actually the worst move possible. You are willingly defaulting on a legal agreement you signed. Stopping payment on an account you control while you’re current, with no request on file, reads as bad faith.