Short answer: Reconciliation is a clause in your MCA agreement that, in theory, lets you request a temporary reduction in your daily payment if your actual revenue drops below what the funder projected. In practice, most funders make it nearly impossible to actually use. And missing a payment first, then asking for reconciliation, is the worst possible order to do it in. You’ve already triggered default before you’ve made the request.
If you’ve missed a payment and you’re hoping reconciliation will save you, read this carefully before you call your funder.
What reconciliation actually is
When you signed your MCA agreement, somewhere in the contract was a reconciliation clause. This is the legal fiction that makes an MCA an MCA, and not a loan. The funder didn’t lend you money. They purchased your future receivables at a discount. And because they bought a percentage of your future revenue, the daily payment is supposed to reflect what you’re actually collecting.
If your revenue drops, the daily payment is supposed to drop with it. That’s reconciliation.
This clause is the thing that keeps MCAs from being classified as loans, which would subject them to usury laws in most states. No reconciliation clause, no MCA. It’s a usurious loan with a 200% APR.
So every MCA agreement has one. That doesn’t mean every funder honors it.
How reconciliation is supposed to work
In a clean reconciliation, here’s the sequence:
- Your revenue drops below the projected daily average the funder used to size your daily payment
- You notify the funder, in writing, and request a reconciliation
- You provide bank statements, processor statements, and whatever else they ask for
- The funder reviews, recalculates the daily payment based on actual receipts, and adjusts the ACH downward
- When revenue recovers, the daily payment goes back up
- The total amount you owe doesn’t change. The timeline does.
That’s the theory. In a fair world, it would work like that.
What actually happens
Most funders treat reconciliation requests like a hostile act. The moment you ask, you’ve signaled that you’re struggling. And a struggling merchant is a default risk. So instead of helping you, many funders will:
- Ignore the request entirely, and let the ACH keep hitting
- Demand documentation that’s intentionally hard to produce in a short window
- Approve a “reconciliation” that’s actually a forbearance with new fees attached
- Use the request as leverage to push you into a refinance or a stack with their preferred broker
- Accelerate the balance, because your written request is now evidence you can’t pay
This is the trap. The clause exists to make the contract legal. It doesn’t exist to be used.
Why missing a payment first changes everything
Here’s where most business owners get it wrong. They miss a payment, the ACH bounces, and then they call the funder asking for reconciliation. By that point, you’re already in default under the agreement.
Reconciliation is a forward-looking request. It assumes you’re current. It assumes you’re operating in good faith under the contract. The moment the ACH bounces, you’ve broken the contract. Now you’re not negotiating reconciliation. You’re negotiating from default.
The funder knows this. They’ll often still take the call, still ask for the documents, still let you think reconciliation is on the table. It’s not. What they’re actually doing is gathering information to assess collectability before they accelerate.
If you’re going to request reconciliation, you do it before the ACH bounces. Not after.
What documentation funders will ask for
If you’re requesting reconciliation in good faith, before missing a payment, expect to provide:
- The last 60-90 days of bank statements from every business account
- Merchant processor statements showing actual card volume
- A profit and loss statement, often signed
- An explanation, in writing, of why revenue dropped
- In some cases, projections going forward
- Sometimes, access to a read-only view of your bank account through a service like Plaid or DecisionLogic
Every document you hand over is also a document that can be used against you later if the funder decides to sue. Keep that in mind.
What a real reconciliation looks like vs a fake one
A real reconciliation lowers the daily ACH to a percentage of actual receipts, doesn’t add new fees, doesn’t extend personal guarantees, doesn’t restart the term, and doesn’t require you to sign anything new beyond an addendum to the original agreement.
A fake reconciliation is any of the following dressed up to look like reconciliation:
- A “modification” that adds default fees to the balance
- A new agreement that resets the personal guarantee
- A reduced payment that’s actually a forbearance, with the deferred amount due in a balloon at the end
- A “reconciliation” that’s contingent on you taking a second position from a related funder
- Any document that contains the words “confession of judgment,” “amended agreement,” or “additional guarantor”
If they send you a document, send it to an attorney before you sign. Not after. Before.
What to do if you’ve already missed a payment
If the ACH already bounced, reconciliation is mostly off the table as a clean remedy. What you actually have are three options, and you need to pick one fast.
- Cure the default immediately, if you can. Wire the missed payment same day, get current, and then request reconciliation in writing. This is the only path where reconciliation is realistically still available.
- Negotiate a workout or settlement directly with the funder, understanding that you’re now negotiating from default. The leverage has shifted. Expect a worse deal than reconciliation would have given you.
- Get representation before the funder accelerates. Once they’ve sent the acceleration notice, the timeline collapses. UCC notices go out, restraining orders get filed, and you’re now on their schedule, not yours.
The worst thing you can do is nothing. The second worst is calling the funder yourself and saying things you can’t take back.
The bottom line
Reconciliation is a real clause in a real contract, and it’s enforceable. But it’s enforceable on the funder’s terms, in the funder’s timeline, with the funder’s interpretation of what “good faith” means. If you’re current, healthy, and just had a slow month, you have a real shot. If you’ve already missed a payment, you don’t. You have a negotiation, and you need someone in the room who’s done it before.
