What it does
An MCA is structured as the purchase of a percentage of your future receivables, often called the "specified percentage" or "holdback." Because fixed daily payments are only an estimate of that percentage, many agreements allow the payment to be reconciled to what your business actually received.
If your receivables fall, a reconciliation can lower the payment to match the agreed percentage. If they rise, the funder may also be entitled to adjust upward.
Why it matters
Reconciliation is part of what distinguishes many MCAs from loans. Courts, including New York courts, have looked at whether a genuine reconciliation provision exists when deciding how an MCA should be treated. That legal question is for an attorney, but the practical point is simple: if your agreement has the clause, you may be able to use it.
How to request a reconciliation
- Find the reconciliation section and note any deadlines, notice address and required documents.
- Gather bank statements for the period the agreement specifies.
- Calculate your actual receivables and the agreed percentage of them.
- Send a written request by the method the agreement requires, and keep proof of delivery.
- Follow up in writing and keep copies of every response.
Questions
What if the funder ignores my reconciliation request?
Keep records of your request and follow-ups. A pattern of ignored requests can be relevant later. Discuss next steps with an advisor or attorney.