Welcome to Delancey Street. We’re a premier business debt settlement company. The goal of this article is to help you understand whether you need an MCA debt advisor to help you avoid going into default, and save your business. Needless to say, most articles on this are garbage. They list “benefits” like it’s a brochure and offer no practical advice. We’re going to do the opposite, skip the brochure, go a mile deep on the one thing that actually matters when revenue drops and you’ve got four cash advances hitting your account every morning.
The trap, mechanically
Here’s what people miss about MCAs. It’s not a loan – even though brokers will call it an MCA loan – they’re being inaccurate. Legally it’s a purchase of future receivables, which sounds like technical nonsense until you realize it’s the entire reason your business is bleeding out. A loan amortizes, there’s usury caps, and there’s limits on what they can and can’t do. Revenue drops, you can sometimes work something out, refi etc. An MCA doesn’t care. The funder bought, say, $130k of your future sales for $100k today and they’re pulling a fixed dollar amount every single business day no matter what your sales actually did – that’s not how it’s supposed to work, but that’s how MCA’s normally operate.
So sales drop 40% in a slow quarter and the debit -still hits the same on a daily and weekly basis.
And nobody stacks just one MCA. The broker who got you the first MCA, will keep messaging you and catch you one day when you need another infusion of cash. By the time you go looking for an MCA debt advisor to bail you out of these MCA’s, you’ve got four, five, the second position took the first one’s leftovers and the third took the second’s, it’s positions all the way down and the daily total is now more than you net. No business has the margins to afford an MCA with 100-200% APR. But what happens when you stack multiple MCA’s? That’s a recipe for disaster.
That’s the spiral. It’s a fixed debit meeting a variable revenue, every single morning, while you’re not allowed to slow down, and you have to somehow figure out how to grow your business in order to pay it back.
The “reconciliation clause” does almost nothing
Funders love to point at the reconciliation clause. “Revenue drops? Just send your statements and we adjust.”
Sure. Try it.
In practice the reconciliation process is -designed to fail. There are many vague triggers, a “good faith” standard nobody defines, documentation requests that move every time you submit, and meanwhile the full daily debit keeps hitting at the old number while they “review.” There is no limit on the amount of time they take to review your situation, they can take a week, 2 weeks, or more, and by that time – you’ve already defaulted. We’ve watched a request sit three weeks while a business that legally should’ve been adjusted got drained anyway every morning. Pretty soon, they defaulted, despite being stuck in the “reconciliation,” queue. The clause exists so the contract reads fair in front of a judge. It is not a tool you can pull in a crisis, because in practice it’s rarely obeyed by lenders.
A good MCA debt advisor knows this and doesn’t waste your two good weeks of runway trying the door that’s painted on the wall.
What an advisor actually does
Three moves, in this order, and the order matters.
1. Stop the MCA daily bleeding. Before any negotiation the daily debits have to come down or stop. Often, it begins with you tracking the daily debits, documenting the revenue downtrend, and then putting in email, mail, and phone format, requests for lowering the MCA payments. This is an MCA reconciliation attempt.
2. Triage the stack. Not all MCA positions are equal. Some funders settle at 50 cents. Some never settle and will sue you in Erie County in nine days flat.
3. Restructure or settle. In practice when you have multiple positions, MCA restructuring looks like -modify everything at once into something you can survive, lower the daily, stretch the term, knock the payoff down.
The uncomfortable but true part
An advisor is not a magician and anybody promising “pennies on the dollar” guaranteed is selling you something they can never provide. What they actually do is buy time, kill the daily debit that’s strangling you, and apply leverage you don’t have alone.
What they can’t do is make the underlying business work. If your revenue’s gone for good, restructuring just slows the funeral, and the advisors who are honest will tell you that on call one. The ones who won’t are the ones charging a giant upfront fee to “enroll” you in a program and then ghosting.
At Delancey Street, we are committed to a blue chip approach to helping business owners get out of debt. When you first contact us, we look at your overall situation. We know each of the lenders individually and know their philosophy. We know how they operate, and know what their approach is. Not all lenders are the same. Each one has a different approach. Some are more aggressive, while others are more lenient and open to negotiation. Often the most predatory lenders are terrible, and unethical, they have no ethics what so ever, and will behave in ways that shock you. It’s our job, as your MCA debt advisor, to help you navigate these murky waters.
