Yes. you can negotiate your MCA debt. The deal is private, and there's no reason the two of you can't rewrite the contract. Whether it's reducing the daily debit amount, extending the payment plan, or negotiating to pay down the remaining balance in installments, or even a lump sum, it's all possible. The hard part is, the MCA company doesn't have to agree. Expect collection efforts to continue unabated until then.
Why would an MCA company agree to take less?
Usury. While corporations in New York can't raise civil usury, pursuant to General Obligations Law § 5-521, they can raise criminal usury, pursuant to Penal Law § 190.40, where the interest rate exceeds 25% per annum. The Court of Appeals held in Adar Bays v GeneSYS ID (2021) that a criminally usurious loan to a corporation is wholly void. The problem is, the Adar Bays case was based on a convertible note. The merchant needs to prove usury, starting with proof that the MCA is really a loan. A First Department case from February 2026 held that the parties' agreements, "although styled as MCAs, are properly characterized as loans," because of the fixed daily payment amount and the lack of any actual reconciliation (People v Richmond Capital Group).
Bankruptcy. When a merchant files for bankruptcy, it triggers the automatic stay, which prevents "any act to collect" on any prepetition claims, pursuant to 11 USC § 362(a)(6). Also, the trustee can claw back any payments made to any creditor within the 90 days prior to the bankruptcy, pursuant to 11 USC § 547(b).
Collections. New York's CPLR § 3218(b) prevents the confession of judgment unless in the county where the defendant resides, and a business resides where it has a place of business, so a business with no place of business in New York can't have judgment confessed against it here. Texas recently passed legislation that voids the confession of judgment in any commercial sales based financing contract effective September 1, 2025 (Texas House Bill 700). Finally, the judgment may be worthless if the business has no funds for the MCA to levy upon.
Regulatory pressure. The Federal Trade Commission obtained a $20.3 million judgment against MCA operator Jonathan Braun in February 2024 (see FTC v RCG Advances, LLC). The New York Attorney General's office settled a case with MCA operator Yellowstone Capital in January 2025, canceling $534,552,724 owed by more than 18,000 businesses. While this was the result of the AG's intervention, not negotiations, it certainly shows that the balances aren't immutable.
What kinds of MCA settlement deals are there?
Deals range from modifying the existing contract to a one-time payment that pays off the account.
| Type of Deal | What's Changing | What to Expect in the Settlement Deal |
|---|
| Reconciliation | Reduction in the daily or weekly debit amounts based on the actual receivables, but the total amount owed remains the same. | An adjustment to the remittance amount and the period of time that it will be in effect. |
| Forbearance | A temporary halt or reduction in the payment amount, typically prior to going into default. | A start and end date for the forbearance. |
| Restructuring / Payment Plan | An extension of the remaining balance to a longer term, typically weekly or monthly payments. | The new payment schedule, and possibly a waiver of default fees. |
| Structured Reduced Balance Settlement | A reduction in the total amount owed, paid over time. | The reduction in the total amount, the installment dates, and the consequences of not making the payments. |
| Lump Sum Settlement | A one-time payment, for less than the balance, that closes the account. | A letter confirming the zero balance, and the terms of the release. |
What your deal will be depends on the stage of the MCA, and this post goes into detail about what MCA debt can be settled for at each stage.
Can you negotiate MCA debt before you default?
It is possible to negotiate before defaulting, typically by utilizing the reconciliation clause in the MCA or by asking for a short forbearance. In the Richmond Capital case the court found the funder's refusal to reconcile was a sign that the MCA was really a loan.
Once a business has defaulted on the MCA the deal will typically be for a lump sum payment or a structured payment deal. If the funder has sued or gotten a Confessed Judgment, the deal will include closing it out. In Pennsylvania you typically have 30 days after being served with notice of a Confessed Judgment to file for relief from the judgment. See Pa.R.C.P. 2959. When a business has multiple MCA funders, settling a debt with one funder will not affect the other funders.
What should be included in a signed MCA settlement?
Make sure the deal includes everything you need to close the file with the funder. Paying off the debt won't close the lien or dismiss the lawsuit on its own. Your settlement may need to include:
- A release of the debt for the business and yourself if you signed as a personal guarantor
- That they will file a UCC-3 termination statement to remove the UCC lien on your business. Demand this in writing so you can use UCC 9-513 if they don't file it.
- Dismissal of any lawsuits or satisfaction of any judgments
- That they will withdraw in writing any notices that they sent to your customers or payment processors under UCC 9-406
- What happens if you miss a payment on the new deal
Our post about settling MCAs for less than you owe covers the release language and tax implications in more detail.
Frequently Asked Questions
Will the funder stop pulling payments while we negotiate a deal?
Typically the funder will continue to pull payments while you negotiate a deal to settle your MCA.
If we settle the MCA, will that release my personal guarantee on the MCA?
Only if the release specifically releases you as the personal guarantor. A release of only the LLC or corporation may not release your personal guarantee.
If we settle the MCA, will we have to pay taxes on the amount that was forgiven?
Typically when debt is canceled it becomes taxable income to the business unless an exception under 26 U.S.C. 108 applies. Exceptions include debt canceled in bankruptcy or while the business was insolvent. According to the IRS you still have to report canceled debt even if you do not receive a 1099-C.
If we pay off the MCA, will the UCC lien be automatically removed?
No. Under UCC 9-513(c), once no debt is owed on the UCC lien the secured party must file or send a termination statement within 20 days after receiving an authenticated demand for a termination statement.