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The MCA reconciliation clause: the payment cut most owners never claim

Buried in most MCA agreements is a clause that can lower your daily payment without a settlement, a default, or a fee: reconciliation. It exists because the funder needs it there for legal reasons. Most owners never use it. Here is how it works and how to claim it.

Why the clause exists at all

An MCA is legally a purchase of a percentage of your future revenue, not a loan. But the daily amount you pay is a fixed dollar figure estimated from past revenue. Reconciliation is the mechanism that trues the fixed pull back to the agreed percentage of actual revenue, and its presence is a core reason courts treat MCAs as purchases rather than usurious loans.

That legal function is your leverage: a funder that ignores its own reconciliation clause is undermining the characterization its entire contract depends on, and experienced attorneys make exactly that point when funders stall.

How to invoke it, step by step

The process is administrative, not adversarial. Done properly it reads like bookkeeping, not distress.

Find the clause: search the agreement for 'reconciliation', 'adjustment', or 'true-up'
Compute the gap: agreed percentage times actual monthly revenue versus what was actually debited
Gather proof: bank statements and processing statements for the period
Send the request in writing, to the notice address in the contract, citing the clause number
Ask for both: a refund or credit of the over-collection, and a reduced go-forward daily amount
Calendar the response deadline the clause specifies, and follow up in writing

What funders do when you ask

Established funders process legitimate reconciliation requests, grudgingly but routinely. The stall patterns to expect: requests for endless additional documentation, offers to 'modify' the agreement instead (read anything new for fresh guarantees or COJs before signing), or simple silence past the contractual deadline.

Silence or refusal converts a bookkeeping request into evidence. Documented refusal to reconcile supports a recharacterization argument, the claim that the MCA is actually a disguised loan, which is one of the stronger levers a settlement attorney can bring to the table afterward.

What reconciliation cannot do

Reconciliation adjusts the payment to your revenue reality. It does not reduce the total you owe, remove liens, or fix a stack of five positions each pulling daily. If the business cannot survive even a correctly reconciled payment, you are past the bookkeeping remedy and into restructuring or settlement territory, and it is better to know that early.

Common questions

Does every MCA contract have a reconciliation clause?

Most modern agreements do, because it protects the funder's legal characterization. Some older or more aggressive contracts omit it or make it discretionary. If yours has none, that absence itself is useful to a settlement attorney arguing the advance functions as a loan.

Will asking for reconciliation put me in default?

No. Invoking a right the contract grants you is not a default event, and the request, made in writing with documentation, signals a merchant managing the account rather than one about to disappear. What triggers defaults is missed payments and silence.

My revenue dropped 40 percent. How much should my payment drop?

In principle, proportionally: the daily pull should true up to the agreed percentage of actual revenue, so a 40 percent revenue drop supports roughly a 40 percent payment reduction for the period, plus a credit for what was over-collected. The contract's exact formula governs.

Takeaway

Before you pay anyone to fix an unaffordable MCA payment, check whether the contract already obligates the funder to fix it. Reconciliation is free, fast when it works, and evidence when it does not.