If you’re reading this, you probably have two, three, maybe four MCAs hitting your account every morning. And this morning, there wasn’t enough in there to cover all of them. Now you’re staring at your bank app, trying to figure out which funder to keep happy, and which one to let bounce.
Short answer: There’s no “right” MCA to pay first in the way you’re hoping. Every funder you don’t pay is going to treat it as a default, accelerate the balance, and start enforcement. But, if you have to triage, the order is roughly: the funder with the most aggressive collections reputation first, the funder with a confession of judgment second, the funder holding your primary processor third, and the smallest balance with the least teeth, last. Most business owners do this exact opposite. They pay the loudest funder, who happens to be the smallest, and let the COJ holder bounce. That’s how accounts get frozen by Friday.
If you’re in this spot, read this carefully before you move money anywhere.
Why the “pay everyone a little” strategy fails
Most owners, when they first get into trouble, will try to split the deficit. They’ll partial pay each funder, hoping to buy goodwill. This doesn’t work. Here’s why.
- MCAs aren’t loans. A partial payment doesn’t reduce your daily obligation, it just shows up as a short payment, and most agreements treat a short payment the same as a missed payment.
- The funder’s system is automated. A human isn’t looking at your account thinking “well, he tried.” A script flags the NSF, and the collections workflow starts.
- You’re now in default with all of them, instead of one. Congratulations – you just turned one fire into four.
The “spread it thin” instinct comes from how a normal business owner thinks about vendors. MCAs aren’t vendors. They don’t care about the relationship. They care about the contract, and the contract says you owe the full daily amount, every day.
The real triage order
Here’s how to actually think about it. You’re not trying to keep everyone happy. You’re trying to delay the funder who can hurt you the most, the longest.
1. The funder with a Confession of Judgment (COJ)
If you signed a COJ when you took the advance, that funder can walk into a New York court(or wherever the COJ is venued), file the confession, and have a judgment against you within days. No lawsuit, no service, no chance to defend. Once they have the judgment, they can hit your bank with a restraining notice, and freeze every account tied to your EIN and SSN within hours.
This is the funder you pay first, if you’re paying anyone.
How do you know if you signed a COJ? Pull the agreement. Look for a separate document, often titled “Affidavit of Confession of Judgment,” that you signed and notarized. If you can’t find it, assume you signed one – most pre-2019 MCAs had them, and a lot of out-of-state funders still use them.
2. The funder who holds your primary payment processor
Some MCAs are split-funded, meaning they take a percentage of your daily card sales directly from your processor (Stripe, Square, Clover, Fiserv, whoever). If you default on this funder, they don’t need to sue you to get paid. They just send a notice to your processor, and your processor reroutes the money before it ever hits your bank account.
You won’t see it coming. You’ll just notice your daily deposits dropped to zero.
If you depend on card sales to operate, this funder is your second priority. Letting them default means you lose access to your own revenue, and you can’t pay anyone, including payroll.
3. The funder with the most aggressive collections reputation
Every broker, every attorney in this space, knows which funders are the screamers. The ones who’ll call your customers within 48 hours. The ones who’ll send a “process server” to your house at 9pm on a Sunday. The ones who’ll email your vendors a copy of the UCC filing, with a note saying you’re going out of business.
You probably know who they are too. If you don’t, ask anyone who’s been in MCA collections more than a year – they’ll tell you.
These funders won’t necessarily hurt you the worst, legally. But they’ll make your life unlivable while the legal stuff plays out, and they’ll do real damage to your customer relationships in the meantime. Pay them third, if you can.
4. Everyone else
The smallest balances. The newest funders. The ones without COJs, without processor holds, without a reputation for going nuclear. These are the ones you let bounce, if you have to let something bounce.
They’ll still default you. They’ll still accelerate. They’ll still file UCCs, and eventually sue. But the timeline is weeks to months, not hours to days. And in MCA triage, time is the only thing that matters.
What you should NOT do, even though it feels right
A few moves that business owners make in this situation, that make everything worse:
- Don’t close the bank account and open a new one. Every MCA agreement has a clause that says changing accounts is a default. You’re not hiding – the funder will find the new account through your processor, your customers, or a bank levy. And now you’ve handed them a clean default to point to in court.
- Don’t take a fifth MCA to cover the first four. This is the stacking spiral. It feels like a solution for about 11 days, and then you have five funders defaulting instead of four, and the new funder is usually the most expensive of the bunch.
- Don’t ghost the funders. Counterintuitive, I know. But the funders who go hardest, fastest, are the ones who can’t reach you. A funder who has you on the phone, even if you’re telling them you can’t pay today, is a funder who’s slightly less likely to file Monday morning. Buy yourself days.
- Don’t sign anything a funder sends you during default without a lawyer reading it. “Modification agreements,” “forbearance agreements,” “reaffirmations” – a lot of these are just COJs by another name, or they reset the statute of limitations, or they add the personal guarantor’s spouse. Funders are not your friend right now. The paperwork they offer is for them, not you.
What to actually do today
If you’re sitting at your desk right now, with NSFs already hitting, here’s the order of operations.
- Pull every MCA agreement you have. Find the COJ, find the processor language, find the personal guarantee, find the default clause. You need to know what you signed, before you can decide what to do.
- List every funder, with the daily amount, the remaining balance, and what enforcement mechanism they have. This is your triage chart.
- Call the COJ holder first. Not to pay them in full – to buy time. Tell them you had a processing issue, you’re sending the payment tomorrow, whatever buys you 24-48 hours. Then actually send something, even a partial.
- Call a debt restructuring firm or an MCA defense attorney before end of day. Not next week. Today. The window between first NSF, and the first restraining notice, is sometimes 72 hours. Sometimes less. You don’t have time to shop.
- Do not move money out of the business account to your personal account. That’s a fraudulent transfer, and it’s the one thing that turns a civil MCA collection into something a funder’s lawyer can use to come after you personally, even if you didn’t personally guarantee.
The thing nobody tells you
Stacking didn’t put you here. Stacking is the symptom. The real problem is that you took a second MCA to fix a cash flow gap that the first MCA created, and the math on that doesn’t work, ever. Every MCA you stack increases your daily burn faster than it increases your revenue. By the third or fourth, you’re paying out more in daily debits than you’re bringing in, and the only reason you haven’t bounced yet is because you keep stacking.
The day you can’t stack anymore – because no funder will approve you, or because the deficit is too big to cover – is the day you’re reading this article.
The good news, if there is any, is that this is fixable. MCA balances are negotiable, sometimes aggressively so, especially after default. Funders know that a defaulted balance is worth somewhere between 30 and 60 cents on the dollar in a settlement, and they’d rather take that than spend two years in litigation chasing a personal guarantor who may or may not have assets.
