Can't Keep Up With My MCA Payments — What Are My Options Before I Default?

You have a few options if you’re about to default on a merchant cash advance, but you have to act before that happens. A single bounced debit lets the funder declare a default, make the entire uncollected purchased amount due and pursue your personal guaranty, so act now, while you still hold your contractual rights.

What are my MCA options before default?

There are about six options, and most of them just adjust your daily payment, not your balance. Stopping your ACH or changing your bank account is not an option, since that’s likely a default too. See whether changing bank accounts is a breach.

How much can reconciliation lower my daily payment?

Reconciliation will true up the daily debit to the specified percentage in your agreement, which can make a big difference to the daily payment but not the balance, so your term will be extended. If you have a $130,000 purchased amount with a 15% specified percentage and a $1,500 daily debit (meaning $10,000 a day in receipts), and receipts drop to $6,000 a day, your debit drops to $900. That saves $12,600 per month (assuming 21 business days), but the remaining $65,000 that would have taken 43 business days to pay off will now take 72.

But you need to request reconciliation to preserve this right. In Apollo Funding v. Dave Reilly Construction (2d Dept, September 2025), the court granted summary judgment against a merchant that had received $25,000 for a $37,750 purchased amount and paid $14,240, because it never asked for reconciliation and so couldn’t argue the procedure was illusory. New York courts have also treated a refused written reconciliation request as evidence of a loan. See how to use a reconciliation clause.

Is a forbearance or modification safer than reconciliation?

Probably not. Reconciliation is a contractual right, while a forbearance or modification requires negotiation, and the funder will want something in return. Hardship pauses suit seasonal dips where receipts will pick back up, and modifications that reduce your daily debit and extend the term suit receipts that won’t. Renewals with the same funder may lead to what New York’s disclosure regulation, 23 NYCRR 600.6, calls “double dipping” on finance charges.

In a modification, the funder will likely want a new or broader personal guaranty, and possibly a confession of judgment, or at least a waiver of your defenses. In Diesel Funding v. Build Retail (2d Dept, April 2026), the court permitted the entry of a $1,476,330.68 judgment (a settlement amount plus 20% of the remaining balance) under a settlement stipulation allowing judgment “without any notice.” Get any pause confirmed in an email, and have a lawyer review any modification before you sign. See 5 moves to make before your first missed MCA payment.

Can I refinance or consolidate my MCA into a term loan?

Some private lenders will do this, but you cannot use an SBA loan to pay off an MCA that is still open. SBA SOP 50 10 8 says that MCAs “are not eligible for refinancing.” However, for loans numbered on or after October 1, 2026, SOP 50 10 8.1 allows it only after the MCA has been converted to a term loan and amortized for at least 24 months. The new loan must cover the entire remaining purchased amount (unless there is a prepayment discount), and paying off only some MCAs risks breaching the anti-stacking clause in the rest.

This can provide cash flow relief but often costs you more. If you consolidate an $80,000 MCA stack debiting $1,550/day into a 24-month term loan at 30% with a 5% fee, the loan will cost you about $4,708/month. That cuts your monthly cash outflow by 86% but costs about $33,000 more than simply running off your stack. A new funder wiring money to cover your installments is a “reverse consolidation,” which is really a new (larger) MCA.

Will the MCA funder settle with me if I haven’t missed a payment yet?

Not likely. See Can I settle my MCA before I miss a payment? Check your contract for an early payoff discount.

Can I file for bankruptcy under Subchapter V before I default on my MCA?

Yes. The automatic stay will stop collection activity against your company and its property (but not against you personally as guarantor). See 11 U.S.C. § 362. You can file if your debt is under $3,424,000. The $7.5 million limit expired on June 21, 2024, and a bill to restore it passed both houses of Congress in different forms but wasn’t law as of September 21, 2026. The U.S. Trustee Program’s Subchapter V page confirms Subchapter V cases pay no quarterly fees.

Frequently Asked Questions

Are any of these options going to reduce the amount that I owe?

Outside bankruptcy, only a settlement or an early payoff discount reduces what you owe. Reconciliation, a pause or a modification only changes the timing, and a refinance swaps your balance for a new loan that may cost more. Forgiven debt is generally taxable income unless an exception under 26 U.S.C. § 108 (such as insolvency) applies.

How long do I have to decide what to do?

Decide before your first payment bounces. Some contracts make it a default if you don’t request reconciliation within one business day of a debit returned for insufficient funds.

Does it matter that I am in Pennsylvania?

Pennsylvania is not one of the 10 states that have passed a commercial financing disclosure law. Commercial confessions of judgment are still enforceable here, but you have 30 days from service of the notice to petition the court to strike or open the COJ. See 231 Pa. Code Rule 2959.

Is it legal for an MCA relief company to charge me an upfront fee?

The Federal Trade Commission’s prohibition on advance fees for debt relief is part of the Telemarketing Sales Rule, which generally does not apply to sales calls to businesses. Get the fee in writing and compare savings after fees: one firm’s own figures show 57% before its fee and 27% after.