If you missed one MCA payment, are you in default? It depends on your contract. Some contracts filed with the SEC provide a default only after two bounces. But if you are on a weekly schedule, even one can be a default, and if your contract requires a reconciliation request within a deadline (e.g., one business day), missing it could put you in default.
If I missed one MCA payment, is that a default under my contract?
Most daily-payment MCA contracts have an Event of Default clause under which one bounce is not a default, though they will charge you a fee. It takes two:
- The Cobalt Funding Solutions agreement: “Either two consecutive or four total ACH debits to the Account by CFS are returned for not sufficient funds (NSF) without advance written notice.”
- The Parkview Advance and Arin Funding agreements: “Two (2) or more ACH transactions attempted by the Purchaser are rejected by the Seller’s Bank.”
Some websites suggest you are technically in default if you miss a payment, but your contract may say something else. Watch for these exceptions:
- Weekly payments. Under Cobalt, one returned weekly debit is an Event of Default.
- Failure to request a reconciliation on time. If your contract says you need to request a reconciliation (e.g., within one business day) and you didn’t, you could be in default. In NewCo Capital Group LLC v. SPE Trading, Inc., 2026 NY Slip Op 04057 (4th Dept June 2026), one returned debit and no reconciliation request put the merchant and guarantor in default.
- If there is a catch-all. The Cobalt agreement has a catch-all provision (violation of “any term or covenant”) that a funder may interpret to say that a single failed remittance is an Event of Default. How a court would rule is unclear.
Slow sales are the funder’s risk, not yours. From the Pawn Funding agreement: “experiencing a slowdown in business or a delay in collecting Receivables will not on its own without anything more be considered a breach.”
How much is an MCA NSF fee, and when does the default fee hit?
The NSF fee for these four contracts is between $35 and $50. The default fee comes when you are declared in default.
| Contract | NSF fee | Default fee (when declared) |
|---|
| Cobalt (2022) | $50 for each returned ACH | $2,500 |
| Pawn Funding (2024) | $50 for each return | $2,500 |
| Parkview (2024) | $50 for each NSF | the greater of $5,000 or 25% of the outstanding balance |
| Arin (2024) | $35 for each NSF | the greater of $10,000 or 25% of the outstanding balance |
Say your daily remittance is $300 and you owe $80,000 under the Parkview terms. One NSF costs $50. If the next payment bounces, Parkview’s fee schedule puts you in default after two NSF fees, so you owe $100 in total NSF fees plus a $20,000 default fee (the greater of $5,000 or 25% of $80,000), and they can demand the entire unpaid balance immediately. See what happens if I default on a merchant cash advance.
Does a merchant cash advance have a grace period?
None of the above contracts have a grace period to cure a default. The Cobalt contract says that once in default, its remedies may be invoked “immediately and without notice.” But since default waits for the second bounce on daily payments, you get one bounce to correct it. Cobalt counts only returns “without advance written notice,” so notice given in advance may keep a bounce from counting. Pawn Funding gives two business days to explain an R08, R10, or R29 return before default.
An insufficient-funds return (R01) takes up to two banking days to reach the funder, and with automated bank-feed monitoring they will likely contact you soon after. If they ask you to commit to an amount for the next day, commit in writing only to what you can pay. Under Parkview and Arin, what counts is how many times they tried to collect, not how many times you tried to pay.
What should you do in the 48 hours after a missed MCA debit?
Follow your contract to the letter and put everything in writing to the address it names.
- Read your Event of Default section (one day or week? two consecutive, or a total?), your reconciliation clause (any time limit?) and your fee schedule.
- Send a letter before the next debit date (some contracts offer a reward for this).
- Request reconciliation in writing within any time limit, at the contract’s address (Pawn Funding has a reconciliations email; Parkview and Arin want bank statements at their accounting email). Send bank statements and processor reports showing actual receipts times your percentage against the fixed remittance, by email and certified mail. Review takes 2 business days under Cobalt and Pawn and 5 under Parkview and Arin. In New York, compare receipts to the assumed income on your required disclosure form. See 23 NYCRR 600.6.
- Log every return (date, amount, return code, fee charged).
What not to do:
- Do not revoke your ACH (an Event of Default under Pawn Funding and Cobalt).
- Do not block debits and then code them as R29s (unauthorized debits).
- Do not open a new account (an Event of Default under Parkview and Arin; moving deposits can raise voidable transfer problems under New York Debtor and Creditor Law 273). See my article on whether or not this is a breach.
- Do not take a second advance (“stacking,” an Event of Default under Arin).
Frequently Asked Questions
If I pay weekly, how many bounced debits can I have before I’m in default?
Under Cobalt, daily payers default after two consecutive or four total bounced debits, but weekly payers default after the first. Treat the first NSF as if you’re already in default.
If my sales are down, am I in breach of my MCA contract?
The Pawn Funding contract states that a slowdown in business or a delay in collecting receivables will not on its own put you in breach of your contract. Parkview and Arin state that you may not be in default if you cease operating in the ordinary course of business without willful mishandling.
Do I really have to request a reconciliation if the funder is not going to do it anyway?
Yes, if you want to litigate it later. In Apollo Funding v. Dave Reilly Construction (2d Dept 2025), a defendant that never engaged in the reconciliation procedure couldn’t argue it was illusory, and the funder won summary judgment.
Can my funder freeze my bank account if I fail to pay?
Not unless they use a court process (judgment by confession, etc.). New York only allows the filing of a confession of judgment in the county where the defendant resides or does business (CPLR 3218). Texas voids sales-based financing contracts that contain a confession of judgment. Pennsylvania still allows them for commercial debts, with 30 days to petition to strike or open (Pa.R.C.P. 2959).