To determine “How much can I settle my MCA debt for?” there are 4 key factors to consider:
- are you in default or have you been sued;
- how much of the advance have you already paid back;
- what type of personal guarantee did you sign; and
- what is the legal position of your funder.
What decides how much I can settle my MCA debt for?
For a rough idea, go through the following chart and count how many yes’s push your number down or up:
| How much can I settle my MCA debt for? | Usually pushes your number |
|---|
| Have you already paid back most of the funder’s cash? | Down |
| Did you ask for reconciliation in writing and get refused? | Down |
| Did you sign a performance or capped guaranty? | Down |
| Is your funder subordinate to a prior lien? | Down |
| Can you pay a lump sum? | Down |
| Is bankruptcy an option? | Down |
| Does your funder have a judgment restraining your accounts? | Up |
| Did you sign an unlimited guaranty with reachable assets? | Up |
| Did you default early on with little repayment? | Up |
Does being current or in default change my number?
If you are still current on your MCA there is not much incentive for your funder to settle. Check your contract for a reconciliation clause and, if present, start building a recharacterization record. In a recent case the 1st Dept. found “no reconciliation was performed in practice” and “evidence that such requests were denied” (People v. Richmond Capital Group, 1st Dept. 2026). That finding helped recharacterize the MCAs as loans.
If you have defaulted but have not been sued you are in the best position for a discount. Delancey Street puts it this way: “The biggest discounts come in the middle, after the funder has accepted the borrower can’t pay full freight, but before the file is sold to a third party.” See our breakdown of typical MCA settlement ranges by stage.
Once a judgment has been obtained the leverage shifts to the funder. In New York a judgment creditor’s attorney can issue restraining notices pursuant to CPLR 5222, which will restrain your property “until the judgment is satisfied or vacated” (with some exceptions). But with a real recharacterization defense, a lawsuit can expose the funder to a void contract. New York’s highest court held in Adar Bays v. GeneSYS ID (NY Ct. of Appeals 2021) that loans to a corporation that are criminally usurious are void ab initio.
Finally, if bankruptcy is realistic, a trustee can pursue debits taken in the last 90 days while you were insolvent as a preference under Section 547(b) of the Bankruptcy Code.
Does paying back most of the advance help me settle for less?
One of the most important factors is how much your funder is actually out of pocket: how much cash did they advance and how much have they already gotten back? For example say you took out $100k and your factor rate was 1.4, meaning they purchased $140k of your receivables. Pay back $95k and default, and your balance is $45k, but your funder already has 95% of their cash back. Pay back only $20k and your balance is $120k, with your funder $80k short. See also what MCA companies usually settle for.
Does a personal guarantee mean you’ll pay more?
Often, assuming the funder can collect off of you. First, your business can’t get a Chapter 7 discharge. See 11 U.S.C. 727(a)(1) (no discharge where “the debtor is not an individual”). Second, your business’s bankruptcy won’t by itself stop a suit against you on the guarantee.
Review your personal guarantee before you negotiate. First, with MCAs the personal guarantee is often a guarantee of performance. You are only guaranteeing that the business gave truthful information, followed the agreement’s covenants, etc. Second, it is often capped at a percentage of the purchased amount that corresponds with the percentage of the business that you own. Finally, Herrin Law argues that if the business closes and that isn’t a breach, the guarantor shouldn’t owe anything, though that turns on your contract’s wording.
If the funder can only collect off of one spouse in a marriage, they can’t execute against property held as tenants by the entireties in Pennsylvania. If the other spouse didn’t sign, jointly owned marital property is off limits.
Does your funder’s lien position or legal exposure matter?
Yes! Under the Uniform Commercial Code (“UCC”) Section 9-322, “[c]onflicting perfected security interests ... rank according to priority in time of filing or perfection.” If another funder filed a UCC-1 first, yours is at the back of the line on the same receivables. A UCC search shows the filing order. In Texas, since September 1st, 2025, a provider can’t set up automatic debits without a valid perfected security interest under HB 700.
Also check whether your funder has faced regulatory action. For example, the New York Attorney General settled with Yellowstone Capital for over $1 billion. Yellowstone had to cancel $534,552,724 of debt for over 18,000 businesses. You may find that your debt has already been canceled.
What are some common questions we get about negotiating?
Isn’t it too late to negotiate if the funder already has a judgment or confession of judgment?
No. It depends on the state, but it is never too late to negotiate. First, in Pennsylvania, under Rule 2959, you have 30 days after notice of the confession of judgment to petition to open or strike it. Second, in Texas, a confession of judgment clause in a sales based financing contract is void. Third, in New York, under CPLR 3218 a confession of judgment can only be filed in the county where the business resides or operates.
If I negotiate a bigger discount, will I have to pay taxes on it?
Yes. There are exclusions, but generally canceled debt is taxable. However, the insolvency exclusion only covers the amount by which you were insolvent immediately before the debt was discharged. You must report it even without a 1099-C. See IRS Publication 4681.
The payoff letter has a bunch of fees in it, can I negotiate those away?
Yes! Ask for an itemized payoff before negotiating. Some funders add default fees, attorney fees, or whatever other fees they can. Some will drop late payment penalties, processing fees, etc. in a settlement.
How do I make sure that the amount I negotiated is the last amount I have to pay?
Get all of the proper paperwork. First, a release, especially if you signed as a personal guarantor. Second, if there is a judgment, get it satisfied. Third, make sure the funder files a UCC-3 to terminate their UCC-1. Under the UCC, once nothing is owed and you make an authenticated demand, the funder has 20 days to file it.