How to Request a Reconciliation From Your MCA Provider

If your merchant cash advance (MCA) payments no longer reflect what your business is actually bringing in, the daily or weekly debits can start to feel unaffordable. In that case, you may have the right to request a reconciliation. It’s a standard right built into all MCA contracts, but not all funders honor it. If you’re struggling to get your provider to reconcile your payments, having an attorney in your corner is critical.

What Is a Merchant Cash Advance Reconciliation?

Reconciliation is a contractual right that’s built into many MCA agreements. It lets a business adjust its daily or weekly payments when its actual daily receivables are lower than projected. MCA payments are supposed to track a business’s real revenue rather than stay locked in at a fixed amount, and reconciliation clauses ensure that’s the case.

These clauses also have some real legal implications. Reconciliation is one of the core features that make MCAs “purchases of future receivables” rather than traditional business loans. Without a working reconciliation clause, a court may deem it a loan in disguise.

When Should You Request a Reconciliation?

Requesting a reconciliation might be a good idea if your revenue has declined since your MCA was underwritten. At that point, your payments no longer align with the percentage outlined in your agreement.

There could be several reasons behind such a decline, including a general downward trend in sales, a seasonal slowdown, or the loss of a major customer. No matter the reason, your holdback percentage (i.e., the percentage of your revenue the MCA funder takes) consumes too much of your actual receipts.

If you feel that you may need to turn to reconciliation, request it earlier rather than later. It’s critical that you request it before you miss a debit or default on your MCA. Waiting until you’re already behind on your payments weakens your position, and it could give the funder grounds to declare an event of default, leading to more serious legal consequences.

How to Request a Reconciliation From Your MCA Funder

As with anything relating to your MCA agreement, it’s important to do everything by the book to make sure your business is protected. Any missteps during the reconciliation process could lead the MCA provider to deny your request on procedural grounds. 

• Step 1: Review the agreement and find the reconciliation clause. Pay attention to the exact procedure required, where to send your request (and via what contact method), and any documentation you’re required to include.
• Step 2: Gather supporting documents. Companies may require bank statements, merchant processing reports, and profit-and-loss statements that show the gap between your projected and actual revenue.
• Step 3: Submit a formal written request. Make sure you follow the procedures in your contract. Maintain proof of delivery in case the provider claims it was not received.
• Step 4: Follow up in writing if you don’t get a response. If the contract specifies a response window and the MCA doesn’t meet it, send a written follow-up and keep a record of your communication.

What to Do If Your MCA Funder Refuses or Ignores Your Request

Not every MCA funder responds favorably to reconciliation requests. Some companies deny requests, threaten default for asking, or simply ignore you.

A funder’s refusal to honor a clear reconciliation clause is legally significant. It can be evidence that an MCA functions as a business loan rather than a true purchase of receivables. That distinction opens up legal defenses for you and could even result in the MCA being recharacterized as a loan, subjecting it to usury laws.

If you get to this point, it’s time to involve a MCA debt attorney. Continuing to push on your own risks default, a frozen merchant account, or the funder invoking a confession of judgment (COJ) clause against you. An experienced merchant cash advance attorney can review your situation, determine whether the funder’s refusal constitutes a breach, and help you plan your next steps.

How Tayne Law Group Helps Business Owners Enforce Reconciliation Rights

Tayne Law Group represents small and mid sized business owners across the country in MCA matters including but not limited to disputes over balances, disputes over reconciliation refusals, contract reviews, and challenges to the MCA agreement terms that may be loans in disguise. 

If your funder is ignoring your reconciliation request or threatening adverse consequences against you, don’t wait to ask for help. Contact us today by calling (866) 890-7337 or filling out our short contact form to schedule a free phone consultation. We never share or sell your information, and all conversations are confidential.

Frequently Asked Questions

What is reconciliation in a merchant cash advance agreement?

Reconciliation is a clause in MCA agreements that lets you adjust your daily or weekly debits when your business revenue has fallen. It guarantees that your holdback rate matches what’s stated in your contract.

Can my MCA company legally refuse to reconcile my payments?

An MCA company may be able to refuse to reconcile your payments if you haven’t met the requirements laid out in your contract or failed to follow the correct procedure for requesting reconciliation. An MCA debt attorney can review your contract and situation to determine whether your provider was in the legal right.

How often can I request a reconciliation?

The frequency with which you can request reconciliation depends on your specific agreement. Some contracts may allow you to reconcile at a particular interval, such as monthly, while others have no limit at all. Review your contract language to see what, if any, limits apply.

Does requesting a reconciliation count as defaulting on my MCA?

Requesting reconciliation is a contractual right and doesn’t count as defaulting on your MCA. However, bad-faith lenders may threaten default in response to a reconciliation request. This is a pressure tactic to get you to drop your request or to force you to pay the full balance right away.

What happens if my MCA funder will not honor the reconciliation clause?

If your MCA funder won’t honor your contract’s reconciliation provision, it’s time to involve a business debt attorney. They can review your contract, communicate with your funder on your behalf, and help you pursue any legal options available to you.