The MCA Reconciliation Clause: How to Lower Your Daily Payment When Revenue Drops

By MercResolution · Published 2026-08-25 · Updated 2026-09-07

The reconciliation clause lets you ask the funder to adjust the daily debit to the agreed percentage of your actual receipts. Here is what it says, how to request it in writing with statements, and why a refusal matters later.

The reconciliation clause in a merchant cash advance agreement lets you require the funder to adjust your fixed daily or weekly debit so that it matches the specified percentage of the receivables you actually collected, and to credit you for any overcollection. You invoke it by written request, with bank or processing statements attached. It does not reduce what you owe; it lowers the daily amount and stretches collection over a longer period, which is often the difference between a business that survives a slow quarter and one that does not.

This article explains what the clause typically says, why it is the provision that decides whether your advance is legally a purchase of receivables or a loan, when and how to make the request so that it cannot be brushed aside, what reconciliation does and does not do to your balance, what to do when the funder refuses or stalls, and how a refusal changes your position in a later negotiation or lawsuit.

"Most owners have never read the reconciliation clause, and most funders are counting on that. The day an owner sends a proper written request with statements attached, the conversation changes, because the funder now has to decide whether to honor its own contract."

What the Reconciliation Clause Says

An MCA agreement defines three numbers: the purchased amount the funder is entitled to collect, the specified percentage of your future receipts it has bought, and the daily or weekly remittance. The remittance is described as a good-faith estimate of what the specified percentage will produce. The reconciliation clause, sometimes labelled a true-up or adjustment provision, says that if actual receipts differ from the estimate, the merchant may request, usually monthly, that the funder recalculate the remittance to the specified percentage of actual receipts and credit or refund any amount collected above it.

The wording varies, and the variations matter. Some clauses make reconciliation mandatory on request; others say it is at the funder's sole discretion. Some require the request within a set number of days after the month ends, in a particular form, or only while the merchant is not in default on any other term. Read your own clause for the procedure it prescribes, because a funder that wants to refuse will point to any step you skipped.

Why the Clause Decides Whether Your Advance Is a Purchase or a Loan

A loan is a fixed sum repaid over a fixed term regardless of how the business performs. A purchase of future receivables is supposed to be different: the funder bought a share of what you collect, so if you collect less, it receives less each day and waits longer, and there is no fixed end date. The reconciliation clause is what makes that true in practice. Without it, or with a version the funder never honors, the deal collects a fixed amount over a fixed period, which is what a loan does.

Courts that have examined MCA agreements, most visibly in New York, have looked at whether reconciliation is real and mandatory, whether the term is finite, and whether the funder has recourse if the business simply fails. An illusory reconciliation clause weighs toward treating the advance as a loan, and once it is a loan, that state's usury and lending-license rules may apply. Which rules and with what consequences varies by state; verify the current position with counsel. The full analysis is in MCA loan versus purchase of receivables.

When to Request Reconciliation

Request it the month your receipts fall, not the month the debits start bouncing. By the time the account is overdrawn, the funder can cite returned items as an event of default and argue that a merchant in default is not entitled to reconcile. The request also belongs before any conversation about a renewal, because a renewal is the funder's usual answer to a merchant who cannot carry the debit, and reconciliation is the cheaper remedy the contract already gives you.

Reconciliation is not a one-time event. If the clause allows monthly requests, make one every month that receipts stay below the estimate, and keep a log of each request and response. Owners who are current on their debits often assume the clause is only for emergencies; it is for any period in which the fixed debit exceeds the specified percentage of what you actually collected. What the overdrafts look like when the request is made too late is described in MCA daily payments overdrawing the account.

How to Request Reconciliation in Writing

What Reconciliation Does and Does Not Do

A successful reconciliation lowers the daily pull to a level the business can carry, returns or credits what was overcollected, and keeps you inside the contract rather than in default. It also produces a written record that you asked the funder to perform its own agreement. What it does not do is reduce the purchased amount. The funder still collects everything it bought; it simply collects it over more days. On a steep revenue decline, that can extend the deal considerably, and some funders respond to a reconciliation request by pushing a renewal instead.

With several advances outstanding, each funder gets its own request and its own arithmetic, and the combined adjusted debits still have to fit inside actual receipts. If the arithmetic across all positions does not work even after reconciliation, the conversation moves to a restructure or a settlement. Running those numbers with someone who does it daily is what the free 30-minute consultation is for; you can request the free, confidential debt analysis or ask Stephanie through the chat button to line it up.

What Happens When the Funder Refuses or Stalls

Funders answer reconciliation requests in a handful of predictable ways: silence; a promise to review that never concludes; a demand for documents the clause does not require; an offer to "help" through a renewal; a claim that the clause is discretionary; or an assertion that you are already in default and therefore not entitled to reconcile. Each of these belongs in your file, in writing, next to your request.

What you should not do is treat the refusal as permission to stop the debits. Blocking the ACH is an event of default under nearly every agreement and hands the funder the breach it needs for the guarantee. Re-send the request, note the refusal, and get advice on the next step, which is usually a direct negotiation with the refusal on the table. The broader pattern of funders that will not engage, and how to move them, is covered in what to do when an MCA funder will not negotiate.

How a Refusal Matters Later

In a negotiation, a documented refusal changes what the funder will accept. It has weakened its own claim that the deal was a purchase, exposed itself to a breach-of-contract argument and an overcollection claim, and it knows that counsel on your side will raise all three. Funders price that risk, and the price shows up as a lower settlement figure or a restructure they would otherwise have declined. How the request record fits into the wider negotiation is set out in how to negotiate MCA debt down.

In litigation, the same record supports defenses and counterclaims that counsel may raise: breach by the funder, recharacterization of the advance as a loan, and, depending on the state, usury and licensing arguments. It also matters if the funder later alleges that you defaulted, because a merchant who asked in writing for the contract's remedy and was refused looks very different from one who simply stopped paying.

Where MercResolution Fits

MercResolution is a commercial debt resolution firm in Houston, Texas. Preparing and sending reconciliation requests is routine work for us: we read the clause, calculate the overcollection from your statements, send the request in the form the agreement requires, and track every response. When a funder refuses, we use that record in a direct negotiation for a restructure or settlement that releases the business and the guarantor. The first conversation is a free, confidential analysis of your agreements and statements; what funders are doing on their side is explained on our creditor tactics page.

We are not a law firm. When a refusal turns into litigation, licensed attorneys are engaged for the case while the negotiation continues. We handle business debt only.

Frequently Asked Questions

Does every MCA agreement have a reconciliation clause?

Most do, because the clause is what supports the funder's position that it purchased receivables rather than made a loan. Some agreements omit it or bury it in a definitions section. If yours has no reconciliation provision at all, that absence is itself relevant to whether the advance is really a purchase, and it is worth raising with counsel.

Does reconciliation reduce how much I owe on the MCA?

No. It adjusts the daily or weekly amount to the specified percentage of your actual receipts and credits any overcollection, but the purchased amount stays the same and is collected over a longer period. Reducing the balance itself requires a negotiated settlement, which is a separate conversation that a reconciliation record makes stronger.

Can the funder refuse a reconciliation request?

It depends on the clause. Where reconciliation is mandatory on a proper request, a refusal is a breach of the agreement. Where the clause says it is discretionary, the funder can decline, but a discretionary or never-honored clause weighs toward treating the advance as a loan. Either way, a written refusal is evidence you keep.

Should I stop the daily payments if the funder ignores my request?

Not on your own initiative. Blocking the debits is an event of default under nearly every agreement and triggers the guarantee, fees and customer notices. Re-send the request, document the silence, and get advice on the next move, which is usually a direct negotiation with the funder using the record you have built.

What documents do I need to request reconciliation?

The agreement, so you can cite the clause and the specified percentage; bank statements for the period and processing statements if the funder collects through your card processor; and a one-line calculation showing gross receipts multiplied by the specified percentage against the total debited. Send it by the method the contract names and keep proof of delivery.

This article is for educational purposes only and is not legal, tax, or financial advice. MercResolution is not a law firm. Every situation is different — get a free, confidential analysis of your specific circumstances.