How to Get Out of MCA Debt
To get out of MCA debt, ask each funder for reconciliation first, then see whether a consolidation lowers the total debit, and talk to a business attorney if default is already on the table. Taking another advance to make the payments deepens the problem.
Daily payments eating your deposits? Talk to our team about consolidation before the next debit. Apply now. Applying won't affect your credit.
Owners get out of MCA debt by renegotiating, refinancing into a longer term, or consolidating. Each option and its tradeoffs are below.
Who should read this: owners whose account goes negative around debit dates, and brokers helping a client who took on too much.
Cost, credit, speed and stacking
Cost
Credit
Speed
Stacking
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 gather 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 doesn't 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 debiting 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 sets out the daily debit test and the total payback test.
What do funders look at for a consolidation?
A consolidation funder starts with your bank statements and every open advance. It usually reviews:
- How long the business has been open
- Average monthly deposits, and how steady they are month to month
- Negative-balance days and returned items (NSFs)
- Any advances you already have open, and their daily or weekly payments
Each funder sets its own cutoffs, so a file one funder passes on can fit another. That is why one application sent to several funders can turn up an offer a single funder would not make. Applying won't affect your credit.
What are the steps to get a consolidation offer?
- Send the short application and your last few months of business bank statements.
- We share your file with funders that fit it. Funders review deposits, balances and open positions.
- You get written offers showing the amount, factor rate, total payback, holdback or debit, fees and estimated term.
- You pick one. The funder verifies the file and sends a contract, and funds go out after signing.
What documents should you have ready?
- A government-issued photo ID for each owner
- A voided business check or a bank letter
- Payoff letters for any advance you want to pay off or consolidate
- A list of every open advance: funder, balance, debit amount and how often it runs
Some funders ask for more, such as a processing statement or a tax return.
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 can't 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.
Don't 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.
What numbers should you have for each advance?
Take these from each offer or contract before you talk to a funder, a consolidation company or an attorney:
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 can't 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.
What does a relief request do to the numbers?
Example: two debits of $450 and $300 a day, $750 in all, run against deposits that have fallen to $4,000 a business day, or 18.8%. Say the first contract sets an 8% holdback and the funder agrees to reconcile to actual sales. Its debit drops to $320, and the total falls to $620, or 15.5%. The balance owed doesn't shrink. On $27,000 left, the term runs about 84 business days instead of 60.
Questions owners ask about this
What's the first step out of MCA debt?
Ask each funder for reconciliation in writing, with recent bank statements.
Should I stop paying?
Not without a written agreement. Stopping can count as default.
When should I call an attorney?
When a default notice, a lawsuit or a confession of judgment is involved.
Do settlement companies help?
Some do, and some charge high fees. Read our settlement guide first.
Should I keep records?
Yes. Log every call and email with dates, and send the same statements to every funder.
What else do owners ask?
What should I do if I can't make my MCA payments this week?
Contact each funder in writing before the debit runs, cite the reconciliation clause and attach recent statements. If a default notice has arrived, talk to a business attorney.
How do I get out of MCA debt?
Start with a reconciliation request to each funder, then compare a consolidation using the daily debit and total payback tests. Avoid taking a new advance to cover old ones.
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). The same advice holds when you work out how to get out of MCA debt.
Afterfirst is not a funder; all offers are subject to funder underwriting.
Send one file.
See what fits.
We look at your balances and tell you plainly what could lower the daily payment. Owners never pay us. Applying won't affect your credit.