You may start settlement talks hoping for immediate relief from daily or weekly withdrawals. However, opening negotiations does not automatically pause the payment terms in your merchant cash advance (MCA) agreement. Unless you and the funder agree to different terms, scheduled withdrawals or other collection efforts may continue while you work toward a settlement. For New York business owners, the rules governing MCA agreements can affect what happens during settlement talks.
What contract terms should you review?
Before changing how you make payments, check the terms that control your obligations. Important terms may include:
- Bank withdrawal terms: These explain when and how scheduled payments may be taken from your business account.
- Default terms: These explain what actions the agreement identifies as a default and what collection steps the funder may take in response.
Knowing what your agreement says can help you understand what may happen while settlement talks are still underway.
Is temporary payment relief the same as a settlement?
During negotiations, a funder may offer a temporary payment reduction or another short-term arrangement before you reach a final settlement. Check whether the change affects only your current payments or also changes the total amount you owe. You should also understand when the temporary terms end and what payment schedule applies afterward.
How can you protect your position during settlement talks?
Keeping a written record during settlement negotiations can help you track offers, payment requests, emails and responses. If the funder agrees to reduce, pause or change your payments, make sure the new terms are in writing instead of relying only on oral promises.
Know what you are agreeing to before settling
A settlement can affect more than the amount you pay. The wording may determine when payments change, what happens if your business falls behind again and when the dispute is considered resolved. A legal professional familiar with MCA agreements can help you understand proposed settlement terms and identify obligations that could affect your business after you sign.