You signed an MCA. The daily ACH is eating you your business bank account ever day, $400, $600, whatever it is, and revenue is down 40% from when you signed and the debit hasn’t moved a dollar. You called the MCA lender. They said “that’s not an option” or “we’ll review it” and then ghosted you.
Here’s the thing nobody at the funder is going to tell you – that daily and weekly payment that never changes is probably the single biggest legal vulnerability in the entire contract. And the clause that exposes it is sitting right there in your agreement. Reconciliation clause. This is the golden ticket out of ethically lowering your daily and weekly payment to something that aligns with the downtrend in your revenue.
What it actually is
An MCA isn’t a loan. That’s the whole angle. The funder didn’t lend you money in the legal, techncial sense, that would qualify as a loan under state and federal laws. They “bought” a percentage of your future receivables. Say 15%. The legal technicality on how they issue an MCA, is that they own a slice of your sales going forward, and they collect that slice as it comes in.
But you’re not paying 15% of your sales. You’re paying a fixed number every single day. So how does a fixed daily debit equal “15% of whatever you actually make”? It doesn’t. Which is exactly why the reconciliation clause exists – it’s the real way for you to adjust the amount being debited on a daily basis. At the end of a defined window, monthly usually, your debits get measured against your real deposits, and if they pulled more than the agreed percentage of what you actually brought in, the payment gets adjusted down.
Reconciliation is the mechanism that lets the funder call this thing a purchase instead of a loan. Without a reconciliation, the deal is just a fixed-payment loan wearing a costume, and a fixed-payment loan at an effective 80% APR is a usurious loan, which in New York is criminal at anything over 25%.
Why this is leverage and not just paperwork
So the funder is stuck in a box of their own building. Two doors, both bad for them.
Option 1 – they honor reconciliation. Your daily and weekly ACH payment actually drops to match your real revenue.
Option 2 – they refuse often, or stall so you default first, or bury you in documentation requests designed to make you give up. And the second they do that, they’ve handed your attorney exhibit A in the argument that the deal was a loan all along. A real receivables purchase rises and falls with your business. If they’re insisting you owe a fixed amount no matter what your sales do, then, by their own conduct they’ve created a loan.
That’s the part that’s worth real money. A documented reconciliation refusal is evidence. The New York courts have been hammering this for years now. People v. Richmond Capital – the Appellate Division affirmed a $77 million judgment in February 2026, and one of the grounds was that the reconciliation provisions were a sham. And the Yellowstone Capital matter, the NY AG got a judgment north of a billion dollars with something in the order of $534 million in merchant debt cancelled, and “false reconciliation promises” was named right in the complaint.
You don’t need to win a usury case to benefit from this, by the way.
“May” versus “shall” – go check yours right now
Open the PDF. Ctrl-F “reconciliation.” It might be under a header that says True-Up or Adjustment instead. Read the actual verb.
If it says the funder shall reconcile upon request – that’s mandatory. You have a direct contractual right and they’re obligated to perform, full stop.
If it says may reconcile, or “at funder’s sole discretion,” or “upon funder’s review and approval” then that’s a fake version. Sounds like a right, functions like a coupon they never have to honor. And here’s the twist, the discretionary version is actually worse for the funder in court, because a discretionary reconciliation is barely reconciliation at all, which strengthens the loan argument. Either way you’ve got something.
How to actually invoke it
This is not something you do over a phone call. The rep on the phone telling you “that ship sailed” is stating a negotiating position, not a legal fact, and a phone call leaves no record. What you need to do is start building a paper trail. Do it in writing via email, and via certified letter.
A reconciliation demand that actually does work has four pieces:
- Cite the clause by section number. Don’t say “per my contract.” Say “pursuant to Section 4.2, the Reconciliation Provision.” Show them you read it and understand the reconciliation clause agreement. You understand what it entails.
- Attach the proof. Bank statements, processor reports, whatever documents the revenue decline.
- Do the math for them. Calculate what the debit should be based on the percentage in the contract applied to your actual deposits.
- Set a deadline. A reasonable window to respond.
Send it so there’s a timestamp. and make sure it’s done with certified mail, etc. Then, and this is the part people skip, document everything that happens after.
Reconciliation is not a magic button that zeroes your balance. By itself, a successful reconciliation lowers your payment to match revenue, that’s it, the debt’s still there and you are still legally obligated to pay it. If they honor the reconciliation request, you are required to continue paying the newly reduced amount – if you fail, you are in default. The bigger value is the leverage it builds – a documented refusal plus an effective rate over the usury cap is the underlying facts needed for recharacterizing the whole thing as a loan, and that’s what voids balances and drives settlements down 10, 20 cents on the dollar below where they’d otherwise land.
The reconciliation argument is real but outcomes turn on your exact contract language, your jurisdiction, your judge. Get the contract in front of someone who does MCA defense for a living before you make a move. But pull the agreement and read that one clause tonight.
