How MCA reconciliation adjusts a fixed debit to real sales
Who this page is for: owners whose sales dropped while the daily debit did not, and brokers helping a client ask.
Reviewed by the Afterfirst Editorial TeamLast reviewed 4 minute read
How do you request reconciliation?
Follow the notice steps in your contract. That usually means a written request with documents. The steps generally look like this:
- Find the reconciliation section in the agreement and note where requests go and what documents it asks for.
- Send a written request, by the method the contract names, stating that receivables have declined.
- Attach the bank statements covering the period, and processor statements if you take cards.
- Keep proof of when the request was sent.
- Keep paying under the existing terms while the request is reviewed, unless the contract says otherwise.
What the funder does with a request
The funder checks real sales in the statements against the agreed share. If the numbers support it, it sets a new debit. Some contracts give the funder a set number of days to respond. The change usually lasts for a set period. Then the funder may reconcile again, up or down.
How often can an owner request reconciliation?
An owner can ask as often as the contract allows. Many contracts set once per period, such as monthly. The clause itself sets the frequency and the look-back window.
The statement period a funder compares
The look-back window is the period of statements the funder compares against the debit. A window that includes the slow weeks shows the drop clearly.
A two-week slump that barely moves the average
A two-week slump inside a month may not move the monthly average much. The request is strongest once the lower pace shows across the whole window.
Waiting for a full window of lower sales
Send the request after a full window of lower receivables is on the statements. Earlier requests may be denied for lack of evidence.
A second request when sales stay low
If sales stay low, a second request at the next allowed date keeps the debit aligned. Keep a copy of each request and response.
A sudden drop from a lost contract
When receivables fall because a major contract ended, the drop shows at once and stays. Attach the termination notice so the funder does not wait for more months of statements.
Why the MCA reconciliation clause matters legally
The clause matters in court. Judges use it to decide if an advance is a true sale of receivables or a loan. In LG Funding v.
United Senior Properties of Olathe (2020), New York's Appellate Division named a reconciliation clause as one of three factors. It also questioned a clause that left changes up to the funder alone. The loan guide covers the full test.
When reconciliation is not enough, owners often look at consolidation. The guide to heavy payments sets out the steps in order.
What if the funder ignores a reconciliation request?
If a funder ignores or refuses a request with the right documents, keep the records. Then talk to a business attorney.
The response, or lack of one, may matter to how the contract is treated later. Avoid simply stopping payments, which can trigger default.
Reconciliation questions
Owners preparing a reconciliation request usually ask these.
What documents are needed for MCA reconciliation?
Funders usually ask for recent bank statements for the slow period. Some also ask for card processor statements. The contract lists what is required. Send exactly what it asks for, in the format it names.
Does reconciliation reduce the total amount owed?
No, reconciliation changes the size of each debit, not the purchased amount. Collection takes longer when debits are smaller. The total owed stays the same under the contract.
Can reconciliation increase my payment?
Some contracts allow reconciliation in both directions, so a strong period can raise the debit. Read the clause to see whether it works both ways. Most owners request it when sales fall.
Should I stop paying while waiting for reconciliation?
Generally no, because stopping payments can be treated as a default under the contract. Continue under the existing terms unless the agreement or the funder says otherwise in writing. Talk to a lawyer if payments cannot be made.
Sources
Afterfirst is not a lender; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
- Cost
- Reconciliation changes the debit size, not what you owe in total. The payback amount stays the same.
- Credit
- A reconciliation request is about sales, not credit. Ask the funder if its process touches anything else.
- Speed
- The contract sets how often you can ask. We cannot promise how soon a funder acts on a request.
- Stacking
- With two advances, you may need to ask each funder for reconciliation. Their clauses can differ.
Send one file.
See what fits.
Next step: If a debit no longer fits your sales, start an MCA reconciliation request. You can also read the guide on payments that are too high or email info@afterfirstmca.com.
Or write to the desk at info@afterfirstmca.com