A drop in revenue can make daily merchant cash advance (MCA) withdrawals hard to manage. If your business is bringing in less money but the withdrawals continue, you may need relief without creating a default dispute.
Review the MCA agreement first
Start by reading the agreement carefully. Some MCA agreements allow automatic ACH withdrawals. Others include reconciliation terms that may let payments change based on actual receivables. Check for:
- ACH authorization terms
- Reconciliation or adjustment provisions
- Default provisions
- Personal guarantees
- UCC filings or security interests
- Confession-of-judgment provisions
- Notice and dispute requirements
Do not assume the funder can always take a fixed amount no matter what your revenue looks like. The contract language matters, and state law may also matter.
Ask for an adjustment in writing
If revenue has dropped, contact the MCA company before stopping payments or blocking withdrawals. Explain the change and give documents such as bank statements or revenue records.
If the agreement allows reconciliation or another adjustment process, follow that process. You can also ask for a temporary payment reduction or another written modification. Keep copies of emails, notices and bank records. A written change can help avoid later disputes about what was agreed to.
Do not stop payments without advice
Blocking an ACH debit or closing a bank account does not end the payment obligation. In some cases, it may lead to a default claim or collection action.
Some MCA agreements also include personal guarantees, security interests or, in some jurisdictions, confessions of judgment. The effect of those terms depends on the contract and the law that applies.
The FTC has also brought enforcement actions in some cases involving merchant cash advance practices, which shows why businesses should keep clear records of payment disputes and collection activity.
Understand any UCC filing
An MCA company may file a UCC financing statement covering certain business assets or receivables. That filing does not mean the funder has rights to every asset. The agreement and the collateral language help define what the funder may claim. If your business has other lenders, the UCC filing may also affect priority.
Get legal advice before you act
If daily withdrawals are straining your cash flow, an attorney can review the agreement and explain your options. That review may show whether you can request a payment change, what risks come with stopping withdrawals and whether any security interests or guarantees apply.
A revenue decline does not automatically end MCA payments. But reviewing the agreement, documenting the decline and asking for a written change may help you seek relief while lowering the risk of default.
