Reduced MCA Payments

Somewhere in your agreement - usually deep, usually under two hundred words - is a clause that says your payments adjust when your revenue does. The funder's lawyers put it there on purpose. Nobody at the funder expects you to use it.

Here is why it exists. What you signed was not a loan, on paper. The company purchased a cut of your future receivables, a fixed percentage of what comes in. The daily debit is supposed to be an estimate of that percentage, nothing more. Your deposits fall and the debit doesn't move, the company is now collecting receivables it never bought. The reconciliation clause is the mechanism that's supposed to fix this, and in LG Funding v. United Senior Properties the courts made it the very thing that separates a purchase from a loan. Three questions: does the agreement reconcile, does it have a finite term, does the funder have recourse if the business dies. The first question does most of the work. A buyer of receivables shares your downside. A company collecting a fixed sum no matter what has lent you money and called it something else.

The clause is real and it is enforceable. It is also, in practice, decorative, drafted for the inspection rather than the fire. Read your two hundred words before you do anything. Yours will specify a look-back period, what records get reviewed, and how the payment adjusts. Every letter you write flows from that language.

Put It in Writing or You Never Asked

Do not call. The person answering the phone is paid to keep the debit alive, the call will be pleasant, and by next week it never happened. Roughly half the agreements we review put a written notice requirement ahead of the reconciliation right, which means a merchant who spent forty minutes on the phone has, as far as the funder's file is concerned, never raised the issue. That file is the only version of events opposing counsel will ever hand over.

The letter itself is very short. Cite the reconciliation section by number. State the percentage the funder chose at underwriting, it is printed on their paperwork, not yours to argue. Then do the arithmetic on the page: if the deal bought 15% of receipts and last month's deposits were $40,000, the month should have cost you about $6,000. If the fixed debit took $9,400, write both figures and subtract. Hold them to their own numbers. A demand that is a subtraction problem is much harder to file and forget than a demand that is a paragraph.

Attach the bank statements for the look-back period. Send it to the notice address in the contract, certified, keep the receipt. Of four of these we prepared this spring, three got nothing until a second letter went out. Build that into your expectations.

Timing, since everyone gets it wrong: six weeks into the decline. The statements should show a business taking a hit, not a business drowning. And leave the hardship story out entirely. The clause doesn't ask why deposits fell. Give them a slow-season narrative and they'll respond to the narrative, sympathetically, forever, while the debit runs.

Don't Hand Them a Default While You Wait

Keep the account funded and let the debits clear while the request is pending, unless an attorney who has actually read your agreement says otherwise. This is not optional. A blocked or bounced payment is defined as a default in most of these contracts, and a default is where the ugly machinery lives: fees, acceleration of the full balance, the funder contacting your customers directly under the receivables provisions. The demand letter protects none of that by itself.

If you are stacked, with more than one position drafting the same account, understand that a reduction from one funder may barely register. Stacks need restructuring, which is a different and longer conversation than this one.

When They Ignore You, That's Evidence

Like I said, the debit will keep running while you wait. Through your first letter, through your second, through the month your deposits drop by half. The collection software was never wired to the clause that promises adjustment. That gap between what the contract says and what the company does is not just an annoyance, it is the whole case.

On March 5, 2024, the New York Attorney General sued Yellowstone Capital. By January 2025: a $1.065 billion judgment, over $534 million in merchant debt wiped, principals permanently barred from the industry. The AG's office worked out effective rates on some of those advances at 820 percent a year. Yellowstone's contracts said purchase on every page. The collections said loan, and the behavior beat the label.

Your funder's answer to a reconciliation demand is the same test at your scale. Adjust the payment after reviewing your statements and they behaved like a buyer. Ignore two certified letters while drafting a fixed sum from a shrinking account and they have behaved like a lender, and a lender at these rates has a Penal Law § 190.40 problem, because a recharacterized position is a loan and New York's criminal usury line sits very far below 820 percent. The funders know this math better than you do. Refusal is priced in. So keep the silence: both letters, both receipts, and the debit records for every week in between. You are not being ignored, you are being handed the first exhibit at their expense.

Two Pages

An afternoon and the cost of certified mail, demanding nothing the contract didn't already promise. Whichever way it goes you are holding something: a lower payment, or the start of a defense. A right you never use might as well not be in the contract.

Most owners pay the fixed amount down to a dry account and reach out the week after. There is still something to do that week. Less than there was.

Questions We Get

What if my agreement doesn't have a reconciliation clause at all?

Then you may be holding something better than a demand letter. Under the LG Funding factors, no reconciliation is a very strong sign the purchase is a disguised loan, which opens the usury argument instead of the adjustment argument. Have counsel read it before you conclude anything, the analysis turns on the whole document.

How long does the funder have to respond?

Whatever the clause says, which is often nothing. Where no period is stated, a reasonable time, and in practice you should calendar a second letter for two to three weeks out, because the first one gets ignored more often than answered.

Does reconciliation reduce what I owe overall, or just slow it down?

It resizes the payments, not the purchased amount. You still remit the percentage until the total is satisfied, it just takes longer at lower revenue, which is exactly what you bargained for. The balance shrinks on the same total, on a schedule your deposits can survive.

I'm stacked. Can I send demands to all of them at once?

You can, and each contract stands alone, so nothing stops you. Whether you should depends on the stack. Triggering attention from four funders simultaneously has consequences that one letter doesn't, and stacked files usually call for a restructuring strategy rather than clause-by-clause fixes.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.