How to get out of MCA debt: reconcile, consolidate or call counsel
Who this page is for: owners whose account goes negative around debit dates, and brokers helping a client who took on too much.
Reviewed by the Afterfirst Editorial TeamLast reviewed 4 minute read
What should you do first?
First, add up every debit and compare the total with what the account actually receives. Write down each funder, the debit amount and frequency, and the estimated remaining balance.
Then pull the last few months of deposits. That picture shows if the problem is a short dip or a stack too big for the business.
Where reconciliation helps
Reconciliation can help. It brings each fixed debit back in line with the agreed share of real sales. If sales have dropped, each funder's contract may let you request a smaller debit, backed by bank statements. It does not reduce what is owed, but it can make each week survivable. The reconciliation guide lists the steps.
Talking to a funder about relief
You talk to a funder in writing, early, with numbers, before a debit bounces.
A calm written request that cites the reconciliation clause gets a better hearing than a missed payment.
The letter asking for relief
Name the contract, state that receivables have declined, and attach the statements. Ask for the adjustment the contract describes.
Several funders pulling at once
With several advances, write to each funder separately and keep the letters consistent. Each contract has its own process.
A dated record of every call and email
Log every call and email with each funder, with dates and names. The record matters if a dispute follows.
One line in the log
A log entry might read: date, funder, person spoken to, what was asked, what was promised, next step. Short entries kept every time are enough.
Identical statements to every funder
Send each funder the same statements for the same period. Different packets invite different answers and make the story harder to follow.
When does consolidation make sense?
Consolidation makes sense when the business is sound but the debits together are too heavy. A new funder pays off the current advances.
In return, you pay one smaller debit over a longer term. It often costs more in total. Compare the daily debit and the total payback before deciding. The consolidation page shows both tests.
The consolidation page sets out the daily debit test and the total payback test.
When should you call a lawyer instead of a funder?
Call a lawyer when a funder has declared default or sent notices to your customers.
Do the same if it has sued, sought a confession of judgment, or frozen an account. A lawyer can also review whether the contracts' reconciliation provisions work as written. Brokers and funders cannot give legal advice.
| Situation | Where to start |
|---|---|
| Sales dipped, all payments current | Reconciliation request with each funder |
| Payments current but combined debits too heavy | Consolidation quote, with both tests shown |
| Missed payments or default notice | Business attorney |
| Customer notices, lawsuit or judgment | Business attorney |
What to avoid while getting out of MCA debt
Avoid taking a new advance to make the old payments. Avoid blocking debits without a plan.
Do not sign with a company that promises to erase the balance for a fee up front. Each of these can make the position worse. Keep records of every communication with each funder.
When the debits hurt
Owners under payment pressure usually ask these.
Can I stop merchant cash advance payments if my business is struggling?
Stopping payments without the funder's consent can count as a default. That can lead to collection. A reconciliation request is the contract's own route to a smaller debit. If payments truly cannot be made, talk to a business attorney.
Is MCA debt relief the same as consolidation?
No. Debt relief firms usually try to talk balances down, often after payments stop. Consolidation pays the current funders through a new advance. The risks and costs differ a great deal, so check any settlement firm's fees and record before signing.
Will taking another advance fix high MCA payments?
Usually not, because a new advance adds another debit without adding revenue. It can delay the problem briefly and make it larger. Reconciliation or consolidation addresses the burden more directly.
Sources
- The Federal Trade Commission suggests getting advice from a trustworthy person who is not tied to the provider, such as a Small Business Development Center, before you commit to financing (business blog, June 16, 2021). The same advice holds when you work out how to get out of MCA debt.
Afterfirst is not a lender; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
- Cost
- Consolidating can lower the debit but often raises the total. Put the payback of each path side by side.
- Credit
- Debt trouble raises hard credit questions. Ask any new funder to explain its steps, and talk to counsel too.
- Speed
- Do not rush a fix under pressure. We cannot promise how soon any path closes.
- Stacking
- Adding another advance to cover the ones you have usually makes it worse. List all of them and ask what else fits.
Send one file.
See what fits.
Next step: If a consolidation may fit your plan to get out of MCA debt, Call 877-FUND-654Email info@afterfirstmca.com with every position listed. If default has already happened, talk to an attorney first.A person replies within one business day.
Or write to the desk at info@afterfirstmca.com
A person replies within one business day.