Outset Funding Partners

What do I do if I can't pay my merchant cash advance?

Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners ·

TL;DR

Contact the funder before the daily debit bounces — not after. Every workable exit (reconciliation, restructure, consolidation, settlement) is easier and cheaper before you're in formal default. Do not stop paying without notice, do not take a new MCA to cover the old one, and do not sign up with a debt-relief company. The right first call is to the funder's servicing team asking for reconciliation, followed — if the situation is serious — by a licensed MCA defense attorney.

Quick facts

Day 1 move
Written reconciliation request + fresh statements
Never do
Take another MCA to catch up
Never do
Ghost the funder or block the ACH
Never do
Sign with an unlicensed debt-relief company
Talk to attorney when
Lawsuit filed, COJ threatened, or 3+ stacked
Last resort
Subchapter V bankruptcy

The 60-second answer

The single most important thing to know when you can't make an MCA payment is that timing is everything. On day one — before the ACH fails — you have every option: reconciliation, restructure, consolidation, refi. By day 30, if you've done nothing, half those options are already off the table because a UCC-1 escalation, a merchant account freeze, or a lawsuit has already started running.

The second most important thing to know: the funder is not your enemy on day one. They wrote the deal, they want to be paid, and they generally prefer a workout to a lawsuit. Written reconciliation requests, honest conversations about revenue, and proactive contact almost always produce better outcomes than silence.

How it works, step by step

  1. Right now — before the ACH fails
    Email the funder's servicing team. Attach the last 4 weeks of bank statements. Request reconciliation of the daily debit under the reconciliation clause of your agreement.
  2. This week — model your true daily capacity
    Add up every deposit and every outflow for the last 30 days. Your sustainable daily debit is probably 8–12% of daily deposits. Ask the funder to modify to that number.
  3. If reconciliation isn't enough — pursue restructure or consolidation
    A formal restructure extends the term and drops the daily debit. Consolidation replaces multiple MCAs with one lower-daily position. Both need fresh underwriting.
  4. If a lawsuit or COJ threat lands — engage an MCA defense attorney
    Not a debt-relief company. A licensed attorney in your state (or the state of jurisdiction) with real MCA litigation experience. They negotiate settlements every week.
  5. If the whole stack is unsustainable — talk to a bankruptcy attorney
    Subchapter V of Chapter 11 was designed for small businesses to reorganize an unmanageable debt stack. It's a real tool, not a first tool — but it's a real tool.

The five most common mistakes owners make in the first 30 days

Mistake 1 — silence. The funder finds out anyway when the ACH bounces. Silence removes your credibility, kills reconciliation as an option, and moves the file straight to collections. The proactive email on day one, even with bad news, changes the file's trajectory.

Mistake 2 — the "just one more" MCA. Taking a new advance to make payments on the existing one is the single most common pattern in files that end in judgment. Every stack position adds a daily debit before it adds any revenue-generating use. Within 60–90 days the compounded debits exceed real cash flow.

Mistake 3 — blocking the ACH at the bank. Blocking or reversing the daily debit is treated as an automatic breach in almost every MCA contract. It converts a "having trouble paying" file into a "breach of purchase agreement" file overnight and enables the fastest escalation the funder has.

Mistake 4 — signing with a debt-relief company. The standard playbook is to stop paying, redirect funds into their escrow, and "settle later." In practice, the funder sues while the escrow is still small, and the merchant is worse off — with a lawsuit and settlement fees. Use a licensed attorney, not a debt-relief operation.

Mistake 5 — waiting to talk to a bankruptcy attorney until the day before a levy. Subchapter V bankruptcy takes preparation. Owners who talk to counsel 60 days out have real options; owners who call the day before a bank levy usually don't.

Frequently asked questions

Can I ask the MCA company to lower my daily payment?

Yes — this is called reconciliation and it's built into almost every legitimate MCA contract. You put the request in writing, attach recent bank statements showing the revenue drop, and ask for the daily debit to be recalculated. Funders are much more likely to say yes to a proactive request than to a reactive one after several bounced payments.

What if the funder refuses to reconcile?

Escalate in writing, reference the reconciliation clause of your contract by paragraph number, and copy the funder's compliance address. If they still refuse and you're in a state with a commercial financing disclosure law (CA, NY, VA, UT, GA, CT, FL, KS), the state regulator is worth contacting. An attorney can also send a formal demand.

Should I stop the daily ACH at my bank?

No. Blocking the ACH is treated as breach in nearly every MCA contract and triggers the fastest escalation the funder has — merchant account freeze, UCC escalation, and in COJ states, near-immediate legal action. Communicate first; do not block.

Will filing for bankruptcy stop the MCA daily debit?

Yes. The automatic stay under bankruptcy law halts collection activity, including MCA debits, the moment the petition is filed. Subchapter V of Chapter 11 was designed specifically for small businesses to reorganize debt including MCA stacks.

Can I settle an MCA for less than the balance?

Often, yes — especially with attorney representation before or during litigation. Typical settlements land in the 50–80% range of the remaining balance for pre-judgment files. Post-judgment discounts are much smaller.

How do I find a real MCA defense attorney?

Search your state bar's referral service for attorneys who handle commercial finance disputes or business bankruptcy. Ask specifically about MCA litigation experience — look for attorneys who have handled 10+ MCA files in the last year. Avoid any 'MCA relief' website that isn't clearly a licensed law firm.

Sources

Related answers

Explore more

Ready to see your real options?

Get matched with funding partners in our network. Fast pre-qualification, no hard credit pull, no obligation.

Check funding options