What Happens If My Bank Account Is Closed During an MCA?
Tell the funder right away and set up the payments on your new account. A closed account causes returned debits, and most contracts treat an unexplained switch or a blocked account as a serious problem, so the fix is speed and a new authorization.
Why do banks close business accounts?
Banks close business accounts for many reasons: repeated overdrafts, suspected fraud, a change in the bank's policy toward an industry or a mismatch in the account's paperwork. Sometimes the owner closes it to change banks. Whatever the reason, the funder's debits stop working the moment the account closes.
What should you do when the account closes?
- Call the funder the same day and explain what happened.
- Open a new business account in the same legal name.
- Sign a new ACH authorization for the new account.
- Catch up any missed payments once the new account is live.
- Send the funder a voided check or bank letter for the new account.
What should you avoid doing?
Don't let payments bounce without a word. Don't move sales to an account the funder doesn't know about. Contracts usually require notice of a new account, and a funder that finds a new account on its own tends to assume the worst.
Will returned payments trigger fees?
Payments that fail because the account closed usually trigger returned payment fees under the contract. Ask the funder whether it'll waive them given the situation. Many funders will if you're proactive and the account is back up quickly.
What if the bank closed it because of the advance?
Some banks restrict accounts with frequent large ACH debits or overdrafts. If yours closed the account and the advance was part of the reason, talk to the funder about adjusting the payment so the same thing doesn't happen at the new bank.
Why should you save the old statements right away?
Download every statement you can before access disappears. You'll need them for the funder, for taxes and for any future funding.
Is a frozen account the same as a closed one?
A frozen account is different from a closed one. Banks freeze accounts during investigations, disputes or legal actions like a levy. Payments fail the same way, but the account can come back. Find out from the bank which it is and how long it'll last, then tell the funder what you learned. A frozen account that's temporary usually needs only a short pause in payments.
Should you keep a second business account as backup?
Some owners keep a second business account at another bank for exactly this reason. If one bank causes trouble, the business can keep operating. Tell the funder about any account you add, since contracts often require it.
What happens to money left in a closed account?
Banks typically mail a check for the remaining balance when they close an account. That takes time, so plan your payments to the funder around the delay.
How can Afterfirst help with this?
If your account was closed and you have an advance we arranged, call 877-FUND-654 right away. We'll help you reach the funder, move the payments and keep the situation from becoming a default.
What else do owners ask about this?
- What if I switched banks in the last few months?
- What if my MCA funder is debiting more than we agreed?
- Who do I contact about my MCA after funding?
More short answers on this topic are on the after you're funded FAQ, and the MCA early payoff calculator runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. 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.