3 Phone Calls to Make Today If You Are About to Default on Your MCA

Default is not a cliff you fall from. It is a threshold you cross, and the crossing happens at the speed of an ACH failure.

If you know, today, that tomorrow's payment will fail, or that this week's payments are unsustainable, or that the account balance will not survive Friday, the window for action is measured in hours. Not because the legal options expire (most do not), but because the actions taken before default carry different weight than the actions taken after.

Three calls. In this order.

Call an MCA Defense Attorney

Not a general business attorney. Not a bankruptcy lawyer (yet). An attorney who represents merchants against MCA funders, who has read hundreds of these agreements, who has filed motions to vacate confessions of judgment, and who has negotiated settlements at fractions of the face value.

This call accomplishes four things in a single conversation. The attorney identifies whether your agreement is vulnerable to a usury challenge. The attorney advises whether reconciliation should be filed before default. The attorney determines whether the confession of judgment (if one exists) is jurisdictionally defective. And the attorney tells you what to say, and what not to say, when the funder calls.

The funder's attorney has been preparing for this moment for months. Yours should begin preparing today.

The consultation is free. The information it produces is not available from any other source.

Call Your Bank

Inform the bank that you anticipate failed ACH debits and request that the account be configured to decline insufficient-funds transactions rather than process them and charge overdraft fees. This step prevents the accumulation of fees that reduce your account balance without satisfying any debt.

If you have not yet opened a parallel business account at a different institution, ask about the process for doing so. Some banks can open a new commercial account within twenty-four hours. The parallel account, as discussed in every article we have published on this subject, is the operational firewall that keeps the business functioning while the MCA obligation is resolved.

Do not close the original account. Do not request a blanket stop on all ACH debits without legal guidance. Inform the bank of your situation and take the steps your attorney recommends.

Call Your Accountant or Financial Advisor

Your accountant can prepare the documentation an attorney needs: current bank statements, profit and loss statements, accounts receivable aging, and a summary of all outstanding MCA obligations. This package is the raw material for reconciliation requests, settlement negotiations, and (if necessary) bankruptcy filings.

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The accountant can also calculate the number that matters most: the effective APR on each MCA. Factor rates obscure the true cost of capital. When the accountant converts the factor rate and repayment term into an annualized percentage, the resulting number (often exceeding one hundred fifty percent, sometimes exceeding three hundred) becomes a piece of evidence. If the agreement is reclassified as a loan, that APR determines whether it violates usury statutes.

Three calls. An attorney, a bank, and an accountant. The afternoon you spend making them may be the most consequential afternoon your business has had since the day you signed the MCA agreement.

The alternative is waiting for the funder's call. That call is also coming. The difference is who you have spoken to first.