How to Manage Cash Flow During Business Debt Settlement
During the settlement process, the business may continue to receive ACH debits until the funder is engaged and a resolution is reached. The timeline between retaining counsel and finalizing the settlement is the period when cash flow management is most critical.
The Period Between Retention and Resolution
The attorney’s first communication to the funder often produces a cessation or reduction of debits. Not always. Not immediately. But the funder’s awareness that the merchant is represented changes the collection posture. The calls stop. The threats abate. The debits, in many cases, are paused while negotiation is underway.
The Practical Management
Prioritize payroll and rent. These are the obligations that, if missed, produce consequences the business cannot recover from. Payroll failures trigger employee departures. Rent failures trigger eviction proceedings.
Communicate with vendors. A vendor who understands the business is resolving its MCA obligations may extend payment terms during the settlement period. This communication is not weakness. It is management.
Do not take a second MCA. The temptation to stack a new advance to cover the gap during settlement destroys the leverage the attorney is constructing. A second advance creates a second funder, a second UCC lien, and a second set of daily debits that compound the problem the settlement was supposed to resolve.
The settlement period is temporary. The damage from a second advance is not.
We can advise on cash flow management during the settlement process alongside the negotiation itself.
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Disclaimer: This content is for informational purposes only and does not constitute legal advice. Results vary based on individual circumstances. Past results do not guarantee future outcomes. If you are in legal distress, consult a licensed attorney.