reconciliation clause

What Is a Reconciliation Clause?

Small businesses that need working capital often look to alternative sources of funding, such as a merchant cash advance (MCA). In this arrangement, the MCA provider advances funds in exchange for a percentage of the business’s daily credit card receipt. 

Because an MCA is a purchase and sale agreement, it is not considered a loan and is not governed by federal lending laws. If the business defaults on a merchant cash advance, the funder may file a lawsuit for breach of contract. At the same time, MCA agreements contain onerous terms, such as a Confession of Judgment and a personal guarantee, that allow the funder to obtain a court judgment to seize the business’s assets. 

On the other hand, a well-conceived agreement will include a reconciliation clause that provides you with remedies if your business suffers a receivables shortfall. If you need assistance with your merchant cash advance, an experienced debt relief specialist may be able to help you avoid defaulting on your cash advance. Here’s how.

MCAs and Reconciliation Clauses

Because an MCA provider takes a percentage of your daily credit card sales, your business may have trouble repaying the advance if your future receivables decline. A reconciliation clause requires the MCA provider to work with you to restructure the payment plan by reducing the daily withdrawal amount until your credit card sales meet the original target set out in the MCA agreement.

To take advantage of this option, you must promptly notify the funder of the shortfall, provide documents confirming the shortfall, and demonstrate that your business will return to profitability. Once you meet these conditions, the reconciliation clause requires the funder to work out a new payment. 

If the MCA provider refuses to negotiate the payment terms, the funder may be in breach of contract. Nonetheless, merchant cash advance companies rely on aggressive collection actions and bully merchants into paying back the advance. 

How a Debt Relief Specialist Can Help

If your business is at risk of defaulting on an MCA agreement, an experienced debt relief specialist can help to review your cash advance agreement and financial position and explore all your options. At, our team can help your business avoid defaulting on your MCA agreement. 

We will work closely with you to collect the necessary financial information, including proof that your business will return to profitability. We will then intervene on your behalf and renegotiate the payment plan with your MCA provider. If the funder refuses to cooperate, our merchant cash advance attorneys will consider taking legal action. Finally, if reconciling your cash advance is not workable, we can help you explore your other debt-relief options. Contact us today by submitting the convenient intake form.