Is it worth getting MCA debt relief if I’m still current on payments? If the cost of a settlement, including the provider’s fee and tax, is less than what you still owe, it’s worth exploring. That comparison also has to price in the risk of default. The cost of staying current is easy to calculate: the remaining purchased amount of your MCA.
What will it cost me to stay current?
It will cost you the remaining debits. The “interest” on your MCA is added up front, so what you owe is set. If you’re in one of the ten states (CA, CT, FL, GA, KS, MO, NY, TX, UT, VA) that have passed commercial financing disclosure laws, that amount should be stated in your contract. In New York, contracts must also state the total repayment, finance charge, estimated APR, term and periodic payment, and a prepayment statement, often “If you pay off the financing faster than required, you still must pay all or a portion of the finance charge.” See 23 NYCRR 600.6.
What will MCA debt relief cost me?
It will cost you the settlement, the provider’s fee, and the tax on forgiven debt. If the plan has you stop paying the funder, add the cost of default. A prior post surveyed the fees that providers charge. Because those vary so widely, we only use a couple samples here.
Two other costs of MCA debt relief that salespeople may not tell you about:
- Tax: Under IRS Pub 4681, if you are personally liable for a debt and the debt is discharged, you generally must include the discharged amount in your income even if you do not receive Form 1099-C from the creditor. The often-quoted $600 is the funder’s reporting threshold under 26 USC 6050P, not a taxability threshold. The main way to avoid it is the insolvency exception, 26 USC 108, which shelters only “the excess of liabilities over the fair market value of assets” immediately before the discharge. A business healthy enough to stay current is more likely to be solvent, so by our reading of the statute, you will likely owe more in taxes if you settle before defaulting than if you settle after.
- Timing of fee: The FTC’s ban on advance fees is not among the rules that apply to B2B calls under 16 CFR 310.6(b)(7), so providers can charge you before settling anything, and keep the money if the program fails.
Is MCA debt relief worth it if I owe $90K?
While the savings may be lower than you thought, they’re still substantial. Assume you owe $90K, debited $4,500 a week with 20 debits to go, the funder settles for 55%, and you’re solvent, so forgiven debt is taxed at 21%. These are not market data; funders have little incentive to settle with merchants still paying them and may offer worse than 55%. See our post on how to settle your MCA before defaulting. For illustration, here’s how the costs compare:
| How you pay off your MCA | Cost of settlement | Provider’s fee | Tax on $40,500 forgiven debt | Total cost | How much you save |
|---|
| Pay off staying current | $90,000 | $0 | $0 | $90,000 | $0 |
| Enroll in a program that charges 20% of enrolled debt | $49,500 | $18,000 | $8,505 | $76,005 | $13,995 |
| Enroll in a program that charges 25% of your savings | $49,500 | $10,125 | $8,505 | $68,130 | $21,870 |
Note that the 45% paper reduction is approximately 16-24% after fees and tax. The two program rows differ only in how the fee is calculated; see Percentage of Enrolled Debt vs. Percentage of Savings, Which Fee is Better?
What if the debt relief program requires you to stop paying?
If the program requires that you stop paying and it does not succeed, you will likely be in default for allowing a debit to bounce, and the plan will likely accelerate. Depending on your agreement and state, the consequences can include a confession of judgment or notices to your customers under UCC 9-406 for them to pay the funder directly. Be sure to review the Events of Default section of your contract for other fees, such as collection and attorney’s fees.
Say a failed program leaves you owing $22,500 more. Using the enrolled-debt row, the program would have to succeed 62% of the time to break even (13,995 * % successful = 22,500 * % not successful). That ignores any non-refundable enrollment fee. A good rule of thumb: multiply your savings by the likelihood of success, subtract the fallout times the likelihood of failure, and also subtract any fees that are a sunk cost.
When does staying the course win?
Staying current may make sense if you are close to completing the plan, if you have stacked plans and not all funders may participate, or if you may file for bankruptcy soon. Relief may make the most sense if a significant balance remains and you have a provable decrease in revenue while still current.
Before you pay anyone, try the free options first. If your contract has a reconciliation clause, write to the funder and request one. In Apollo Funding Co. v. Dave Reilly Construction, 2d Dept. 2025, a merchant lost the argument that its contract was illusory because it never invoked the reconciliation clause. You can also simply ask your funder for an early payoff discount. For all business debt, see How Much Does Business Debt Settlement Cost?
Frequently Asked Questions
Will my business be responsible for taxes on the debt settled if my business is solvent?
It depends. The IRS treats forgiven debt you are liable for as income, except to the extent you were insolvent (liabilities exceeding assets) immediately before the discharge. For partnerships and multi-member LLCs taxed as partnerships, insolvency is tested per partner; for S corporations, at the corporate level. Ask your CPA whether settlement of a receivables purchase agreement is treated as debt cancellation for tax purposes.
I have four weeks left on my advance. Is it worth it to negotiate?
Probably not. If you owe $18,000 and you settle for 50%, you save $9,000 before you pay a debt settlement fee. A fixed fee or a monthly program fee does not shrink along with the amount of debt left to settle.
I’m current on one MCA but stacked with other funders. Should I negotiate with that funder?
You should run the math funder by funder. If you negotiate with several funders at once, the deal could fall apart with one. Many funding contracts include cross-default provisions.
Should I pay off a funder if I may file for bankruptcy in 90 days?
It depends. If you pay a lump sum to a funder within 90 days before filing for bankruptcy while insolvent, the payment may be subject to clawback as a preference. Currently, the de minimis amount for non-consumer debts is $8,575.