MCA debt relief means any way of lowering or restructuring what you owe on merchant cash advances, and there are only a handful of real ones. From the least drastic to the most, you can ask your funders to reconcile your payments to your actual sales, negotiate a modified schedule, refinance or consolidate the advances into one slower payment, settle for less through a debt relief company or an attorney, or file for bankruptcy. The first three keep you current, keep your funders working with you and leave every other option open, which is why they are where most owners should start. The last two can cut what you owe, but settlement programs usually begin with missed payments, and a missed payment is what triggers the default terms in your contracts. We arrange MCA consolidation and do not offer debt settlement, and this guide covers every route, including the ones we don't provide.
Take an example business that deposits $70,000 a month and has three advances taking $450, $380 and $300 every business day. Each advance may have made good sense when it was signed, but together they come to $5,650 a week in fifteen separate withdrawals, about a third of what comes in. The right next step depends on whether sales are holding up, how far behind you are, if at all, and what your contracts say.
Your MCA debt relief options at a glance
The first three routes keep the business current with its funders. The further down this table you go, the more a route can reduce what you owe and the more it can cost you in other ways.
| Route | What changes | Who you deal with | Do you stay current? | Main cost or risk |
|---|---|---|---|---|
| Reconciliation | Payments fall back to the agreed share of your actual sales | Your existing funder | Yes | Repayment takes longer, and you need statements showing sales fell |
| Modified payment | Lower or less frequent payments for a set period | Your existing funder | Yes, if agreed in writing first | The funder may extend the term or add fees, and it does not have to agree |
| Refinance or consolidation | A new funder pays the old ones off and you make one weekly or monthly payment | A new funder, often through a broker | Yes | The payment is spread over a longer term, so the total may not go down |
| Settlement or relief program | The balance is reduced and paid as a lump sum or in installments | A relief company or attorney, then the funder | Usually not | Default, lawsuits, program fees and possible tax on the forgiven amount |
| Bankruptcy | A court-supervised plan to reorganize, or a liquidation | A bankruptcy attorney and the court | Collection is paused by the automatic stay | Legal cost, a public filing and possibly the business itself |
Read the contracts before you call anyone
Every route depends on terms you have already signed. In each agreement, find the reconciliation or adjustment clause and how to invoke it, the definition of default (some contracts count a blocked debit or a switched bank account as one), the personal guaranty, any confession of judgment or arbitration clause, and the early payoff terms, since a payoff discount changes what a consolidation or settlement is worth.
List each advance's remaining balance, payment and specified percentage. Our guide to factor rates and specified percentages explains how the daily figure was set. Every funder, broker or attorney will ask for that list first.
Ask each funder for a reconciliation
Reconciliation is one of the features that sets a merchant cash advance apart from a loan, because payments are meant to follow your sales. Many advances are priced as a share of your sales but collected as a fixed daily amount estimated at signing, and when sales dip, a reconciliation brings the fixed amount back in line with the agreed share. California's financial regulator, the DFPI, told small businesses in a 2020 advisory that where an advance requires a fixed daily amount, the business typically has a right to reconcile those payments to its actual income, and that the business usually has to tell the funder about its distress to get the adjustment.
Send the request to each funder in writing with your recent bank statements attached, quote the clause you are relying on, and keep paying while it is reviewed. A reconciled payment leaves the total you owe where it was, since the same purchased amount is collected over a longer time, but it eases the pressure on each week's cash. It is also the cheapest relief available, since nothing new is signed and no one else takes a fee.
Negotiate a modified payment
If there is no usable reconciliation clause, or sales are steady but the debits are too many, ask the funder for a modification, such as a reduced payment for a set number of weeks, a switch from daily to weekly debits, or a short pause followed by a catch-up. The request carries more weight when you call before a payment bounces and show from your statements what you can afford.
Get any modification in writing before you change a single payment, stating the new amount, how long it lasts, any added fee, and that the funder will not treat the change as a default. A written agreement keeps you and the funder clear on exactly what was agreed, which a verbal okay on a phone call cannot do.
Refinance or consolidate into one payment
When sales are holding up and the pressure comes from how many debits there are, consolidation is usually the most constructive route, because it keeps you current and turns several schedules into one. The new funder pays each existing funder directly from their payoff letters, the old debits stop, and you make one weekly or monthly payment on a longer term. The longer term is what lowers the payment, and the total may not go down, so we show it in dollars next to what you would pay by keeping your current advances. Our guide to how MCA consolidation works and when it makes sense walks through the cost in dollars and what to gather.
Refinancing is the same move for a single advance whose daily amount is too high. Either way, it works best when you are current or close to it, because the new funder sizes the offer from your recent bank statements. Some owners later move to an SBA or bank loan, which takes weeks and asks for tax returns and a debt schedule.
Reverse consolidation, briefly
In a reverse consolidation, the new funder deposits money into your account each week to cover part of the old daily payments, and you repay it over its own term while the older advances run off as scheduled. It lowers the net amount leaving your account each week during a short crunch, and it is sometimes available when the combined balances are too large for a full payoff. Because the two structures work differently, confirm in writing whether an offer pays your existing funders directly or sends weekly deposits to you, and we will explain which one fits. Our guide to how reverse consolidation works walks through the math week by week.
How MCA debt settlement and relief programs typically work
Debt settlement is what many "MCA debt relief" ads are selling. The company typically tells you to stop paying your funders, sometimes by revoking the debit authorization or moving deposits to a new bank, and to put money into a reserve account instead. Once payments stop, the company offers the funder a reduced amount, paid at once or in installments. The FTC describes consumer debt settlement the same way, with fees charged as a share of the debt resolved or of the amount saved.
Stopping payment is what brings the funder to the table, and it is also what starts the default path. A bounced or blocked debit can count as a default, the contract may then make the whole balance due, and the personal guaranty can come into play. A funder holding a UCC filing can tell your customers to pay it directly, and it can sue, start arbitration or, where you signed a confession of judgment and the state still allows one, enter a judgment without a trial. New York, for example, amended its confession of judgment rule in 2019 so that a confession can be filed only with the clerk of the county where the defendant lives, with a business treated as living wherever it has a place of business. With a judgment in hand, a funder can move to restrain your bank account.
Settlement carries costs beyond the default risk. The FTC warns that you can end up owing more in late fees and interest if creditors refuse to settle, that the process can take years, and that forgiven amounts can be treated as taxable income. That guidance is written for consumer debt, and its rule that a settlement company cannot collect fees before it settles a debt comes from the Telemarketing Sales Rule, which exempts most telephone sales to businesses, keeping only its bans on misrepresentations and false or misleading statements. So the federal ban on fees before a settlement does not cover most business debts. Ask any relief company how and when it charges before you sign, and get the answer in the contract.
If you are weighing a relief company, walk away if it contacted you out of the blue or promises a set percentage off before reading your contracts, and get these answers in writing before you enroll.
- Ask what the total fee is, when each part of it is charged, and whether any of it is due before a single debt is settled.
- Ask whether the program requires you to stop paying, block debits or change banks, and what happens to you if a funder sues while you are enrolled.
- Ask who will appear for you in court or arbitration, and whether that person is a licensed attorney in the state where you would be sued.
- Ask who holds the reserve account and how you get the money back if you leave.
When to hire a commercial attorney
Bring in a commercial attorney who handles merchant cash advance cases once a funder has declared a default, sued, entered a judgment, written to your customers or frozen an account. An attorney can negotiate a settlement and can also answer the lawsuit, challenge a judgment and raise defenses. Ask up front whether they bill hourly, by flat fee or by a share of the savings.
An attorney will also read how your contract is built, since usury limits do not apply to a genuine purchase of future receivables. In LG Funding v. United Senior Properties of Olathe, New York's Appellate Division said courts ask whether the funder is "absolutely entitled to repayment under all circumstances," and listed three factors courts usually weigh, namely whether the agreement has a reconciliation provision, whether it has a finite term, and whether the funder has recourse if the business goes bankrupt. An advance with a working reconciliation clause, no fixed term and no recourse in bankruptcy is treated as the sale it is written to be, and a contract that falls short of those tests can be measured against usury law instead. Which side of that line a particular contract sits on depends on its wording and your state.
Bankruptcy as a last resort
If the business cannot carry its debts on any schedule a funder will accept, bankruptcy is the remaining route, with a bankruptcy attorney from the start. Under chapter 11 of the Bankruptcy Code, a business usually keeps operating as a "debtor in possession" while it proposes a plan to pay creditors over time. Filing triggers an automatic stay that suspends judgments and collection on debts that arose before the filing. Small businesses under a set debt limit can choose subchapter V, which moves faster and pays projected disposable income into a three to five year plan. A sole proprietorship's bankruptcy includes the owner's personal assets, and how a personal guaranty is treated is a question for the attorney before you file.
Where we fit
We are a broker that arranges MCA consolidation and refinancing through the funders in our network, the routes that ease the daily debits while keeping you current and on good terms with your funders. We do not negotiate settlements, and we will never tell you to stop paying a funder. Send a list of your advances with balances and daily amounts, plus four months of business bank statements, and we show each offer's payment, term and total next to what you would pay by keeping your current advances. If a funder has already declared a default or sued, a new funder is less likely to step in, and an attorney is the better first call. If you already hold a consolidation offer, read how we beat an existing MCA offer before you sign it.
There is nothing to pay to apply or to see offers, and no obligation to accept one. Start the short application with your list of balances in front of you, or call (818) 351-0225 to talk it through.
Questions owners ask about MCA debt relief
Is MCA debt collection legit?
Usually it is, when the collector is the funder or a firm it hired and the steps match your contract, which can allow continued debits, a lawsuit or arbitration, UCC notices to your customers and, where the state allows it, a confession of judgment. The federal Fair Debt Collection Practices Act defines a debt as an obligation for personal, family or household purposes, so most of its rules do not reach business advances. Verify any unfamiliar caller through the number in your contract, and report collection you believe crosses the line to your state attorney general.
Can MCA debt be forgiven?
Part of it can be. A funder can agree to accept less than the balance in a negotiated settlement, usually after payments have fallen behind, and a confirmed chapter 11 plan can discharge debts. For a business that is still trading well, consolidating into one payment is usually the better route, since it keeps you current and avoids the default terms. The FTC notes that forgiven amounts can count as taxable income, so ask your accountant how a settlement would be reported before you agree to it.
How do you get out of MCA debt?
Start with the routes that keep you current, asking each funder for a reconciliation if sales have fallen or a written payment modification if they have not, and look at refinancing or consolidating the advances into one weekly or monthly payment if the business is still trading well. Settlement, an attorney-led defense and bankruptcy are the routes for a business that is already in default or cannot carry its debts on any schedule.
Are MCA loans illegal?
No. A merchant cash advance is a legal product, generally written as a purchase of future receivables, and a genuine sale is not a loan, so usury limits on loans generally do not apply to it. Courts look at the substance of the contract, and New York courts weigh whether there is a reconciliation provision, whether the term is finite and whether the funder has recourse in bankruptcy, following LG Funding v. United Senior Properties of Olathe (2020). If you have a question about how your own contract is written, a commercial attorney in your state can read it with you.
Does Today Capital Group offer MCA debt settlement?
No. We arrange consolidation and refinancing through the funders in our network, where a new funder pays your existing advances off directly and you stay current throughout. If your situation calls for a settlement or a legal defense, we will say so and suggest you speak with a commercial attorney.
