Quick Summary
If your business revenue has declined but your MCA withdrawals haven’t changed, you may have a legal right to request a reduction, and possibly even a refund — this is known as reconciliation. New York courts and regulators have been cracking down on MCA funders who ignore reconciliation provisions and have been siding with small business owners. Learn how to assert your right to reconciliation and what to do if the company refuses.
If your MCA company is pulling the same amount from your account every day regardless of what your business is actually bringing in, you may have more options than you think. Most merchant cash advance contracts include a reconciliation provision, which gives you the right to request payment adjustments when your revenue drops.
But many MCA funders make reconciliation difficult or ignore requests entirely, and knowing how to assert that right, and what to do when the funder pushes back, can make a real difference for your business.
Struggling with your debt?
What Is MCA Payment Reconciliation?
Payment reconciliation for merchant cash advances (MCAs) is a provision in your contract that allows you to request that your MCA provider adjust your daily or weekly payments to reflect your actual receivables when your business revenue declines.
When you get an MCA, the funder purchases a percentage of your future receivables, which you’ll then pay back in the form of frequent payments, often as a percentage of your revenue. When your revenue goes down, so should your payments. Reconciliation is a retrospective comparison of the amount your MCA provider has already collected against what they should have collected based on the agreed-upon percentage.
In some cases, reconciliation could result in a refund, reduced future debits, or a credit to your account if the funder has withdrawn more than they were contractually supposed to.
Reconciliation is different from refinancing or restructuring your MCA debt because, rather than trying to change the nature of your debt, this process simply enforces a right that already exists in your contract.
Why Does Reconciliation Matter Under New York Law?
New York courts apply a three-part test established in LG Funding, LLC vs. United Senior Props., 2020, to determine whether an MCA agreement is a legitimate purchase of receivables or is merely a disguised business loan. Here are the three parts:
- Does the agreement have a reconciliation provision?
- Does the agreement have an indefinite (not fixed) term?
- Does the funder have recourse if the merchant declares bankruptcy?
The presence of a reconciliation clause in your agreement is one of the factors used to determine if your MCA is, in fact, a purchase of future receivables. If the agreement lacks a reconciliation clause or uses discretionary language (e.g., “may” instead of “shall”), courts may find that the MCA is actually a loan. Not only is your existing contract void, but it is also recharacterized as a loan subject to New York’s usury cap of 25%.
How Are New York Courts and Regulators Enforcing Reconciliation Rights?
Enforcement of legal merchant cash advances has escalated in recent years. For example, in early 2025, New York Attorney General Letitia James announced a $1.065 billion judgment against Yellowstone Capital, one of the largest MCA operators.
In the lawsuit against Yellowstone, James claimed the company targeted small business owners with predatory loans and unfairly high interest rates. Yellowstone also routinely ignored the reconciliation provisions in MCA contracts, using fraudulent measures to ensure borrowers never qualified.
Similarly, other courts have also found MCA agreements to be criminally usurious loans when reconciliation provisions were illusory or deceptive. For example, in People vs. Richmond Capital Group, the court found that the company’s reconciliation provisions were “a complete sham” after funders admitted reconciliation never occurred.
The clear trend is that courts and regulators are treating failure to reconcile MCAs as evidence that the MCA is actually a loan and should be treated and regulated accordingly.
What Should You Do If Your MCA Company Refuses to Reconcile?
If your business revenue has declined, the first step is to document the decline using bank statements and other financial records, and then submit a formal reconciliation request to your MCA provider.
MCA companies often try to make this process difficult for business owners by stalling, imposing excessive documentation requirements, or ignoring requests entirely. Some companies have even retaliated against reconciliation requests with aggressive collective tactics or threats.
If your MCA funder refuses or ignores your request, contact a merchant cash advance attorney. Their refusal may mean that your MCA is unenforceable, and an attorney can help you navigate the next steps.
During this process, it’s critical that you don’t stop making your MCA payments without legal advice. The MCA company could take advantage of this opportunity to take legal action against you. However, know that you still have rights and your lawyer will help you exercise them.
How Tayne Law Group Can Help
At Tayne Law Group, we work with small business owners to navigate the complex world of merchant cash advances.
When we work together, we can review your MCA agreements to determine if its reconciliation provisions are enforceable. From there, we can help you assert your right to reconciliation, evaluate whether your MCA may be recharacterized as a usurious loan, or help you navigate business debt settlement.
If you’re overwhelmed by your MCA withdrawals, we’re here to help you understand your options. Contact us today by calling (866) 890-7337 or filling out our short contact form to set up a free phone consultation. We never share or sell your information, and all conversations are confidential.
FAQ
Do all MCA contracts include a reconciliation clause?
While not all MCA contracts include reconciliation clauses, most do. Without one, the agreement is likely to be classified as a loan under New York law, which would make it subject to usury interest rate caps. However, some contracts include discretionary or illusory reconciliation language. If that’s the case, an attorney can review your contract to help you decide on your next steps.
What happens if my MCA is found to be a usurious loan?
New York caps loan interest rates at 25%, and any loan with a higher interest rate may be void and unenforceable. If your MCA is recharacterized as a loan, you may not have to pay the remaining balance, and any existing judgments may be vacated.
Can I request reconciliation if I have multiple MCAs?
Yes. Each MCA agreement constitutes a separate contract with its own reconciliation provisions. If you have stacked MCAs (meaning multiple funders are simultaneously debiting your account), reconciliation becomes even more urgent, as the combined withdrawals can quickly exceed a reasonable percentage of your revenue, leaving your business struggling with cash flow.
What if my MCA company threatens me when I request reconciliation?
It’s a serious red flag for an MCA funder to retaliate against a borrower in response to a legitimate contractual reconciliation request. If this happens to you, document any threats and contact an attorney right away. There have been cases where aggressive responses to reconciliation requests were treated as evidence of predatory practices, which would strengthen your position.
