Stop Payment: Meaning in a Merchant Cash Advance
A stop payment is an instruction to your bank to refuse a specific check or electronic debit before it clears. Banks usually charge a fee, and an ACH stop payment needs enough detail for the bank to spot the right debit.
What does stop payment mean?
You call or log in and tell the bank which payment to block, by amount, date and payee. For checks, the bank watches for that check number. For ACH debits, the bank watches for debits from that company. When a matching item shows up, it comes back unpaid, marked with a stop payment reason.
Why does stop payment matter to your business?
A stop payment on a funder's debit is one of the fastest ways to turn a hard month into a legal problem. Merchant agreements almost always list interfering with the funder's debit as an event of default. That can lead to default fees, acceleration of the balance and, depending on the contract and state, collection steps against the business and the guarantor.
What should you know before you consider it?
- Read the default clause so you know exactly what a blocked debit triggers.
- Call the funder first and ask in writing for reconciliation or a payment change.
- If the contract allows a reduced payment, get the new amount confirmed in writing.
- If you believe a debit was never authorized, that's a dispute with your bank, and a different process.
Why talk to counsel first?
If you're far enough behind that stopping payments seems like the only option, talk to a business attorney before you do it. The order of steps matters.
Where will you see it?
In your bank's online menu or at the branch. On statements as a stop payment fee and a returned item. In the default and remedies sections of an MCA contract.
Which terms are related to stop payment?
The full list is in the glossary. Owners ask about this in What does an MCA payment look like on my bank statement?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.