Question 1

What is reconciliation and why does it matter so much?

Accepted Answer

Reconciliation is the clause obligating the funder to adjust your remittances to match what you actually collected. It is what makes the transaction a purchase of receivables rather than a loan, and it is the reason the funder can charge what it charges. It matters twice. Right now, because it can lower your payments without new debt, new fees, or a new guaranty. And later, because a funder that ignored or refused a documented reconciliation request has handed you evidence that the right was illusory, which is central to arguing the advance was really a loan. If lowering what you remit is the immediate problem, start at my payments are too high.

Question 2

Why did nobody tell me I could ask for this?

Accepted Answer

The clause is in your agreement. Whether anyone points it out to you is a different question, and brokers and funders are not obligated to. Read your agreement for the word "reconciliation" or "true-up." If it is there, look for what triggers it, what documentation it requires, where the request has to be sent, and whether it is available to a merchant who is behind.

Question 3

Am I already too late?

Accepted Answer

Possibly, and that is worth finding out before you do anything else. Many agreements condition reconciliation on the merchant not being in default. If you are current, the right is likely live. If you have already missed remittances, it may be gone under that agreement. Being past the window on one agreement does not mean you are past it on all of them. Stacked merchants are frequently current on some positions and behind on others, and each agreement stands on its own terms. If you have already stopped remitting, where you stand now is a different question with a different set of tools.

Question 4

How do I make a reconciliation request?

Accepted Answer

In writing, with revenue documentation, sent to whatever address or contact the agreement specifies. Keep proof of when you sent it and what you sent. Two things go wrong routinely. Requests sent to a general customer service address rather than the one named in the contract. And requests without the specific documentation the clause requires, which gives the funder a reason to reject on process rather than substance. Even a refused request has value. The record of having asked, properly, and been ignored is one of the more useful documents in a file later.

Question 5

What happens to my leverage if I do nothing?

Accepted Answer

It moves to the funder, usually faster than owners expect. While you are performing, you have a contractual right to raise, several possible counterparties, and a business that is still operating. Once remittances stop and funds are frozen, you have none of that. A business that cannot make payroll on Friday accepts whatever it is offered on Thursday. Funders understand that. This is why timing determines outcomes more than argument does.

Question 6

What happens if I default on a merchant cash advance?

Accepted Answer

Collection can start before any lawsuit. Under UCC Article 9, a secured party may notify your customers to pay it directly after default, so revenue can stop before you are ever served with papers. Most owners expect a demand letter, then a lawsuit, then enforcement. What often happens instead is acceleration, then receivables interruption, then litigation if the business is still running. Two pages cover what that looks like in practice: notices sent to your customers and frozen bank and processor funds.

Question 7

Do I actually need a lawyer, or can I handle this myself?

Accepted Answer

Some owners with a single position and no enforcement handle it themselves. Most people reading this page are past that. The relevant question is cost against exposure, and you can answer it without spending anything. The first conversation with us is free. That call is usually enough to tell you whether your reconciliation window is still open, whether your agreements have defects worth raising, and whether the deal in front of you makes your position better or worse. Those are decisions that move tens of thousands of dollars. If you want more than a conversation, what it costs to work with a lawyer covers hourly consulting, retainers, and payment plans.

Question 8

Can a merchant cash advance company sue me personally?

Accepted Answer

Yes, if you signed a guaranty. Most of these agreements include either a personal guaranty or a performance guaranty signed by the owner, and both can create personal exposure. New York does not attach fixed consequences to those labels. The language of your specific guaranty and what triggers it is what controls.

Question 9

Is a personal guarantee enforceable?

Accepted Answer

Usually, and the specific document decides it. Enforceability turns on formation, consideration, delivery, and the conditions in the document. Defects worth checking: the guaranty names a different entity than the main agreement, defines "Merchant" inconsistently across documents, or sweeps in affiliates that never signed. A material identification defect can create a defense, though a court may look at the whole agreement, so not every naming error defeats enforcement. The absence of the funder's countersignature is generally not by itself a defect.

Question 10

Can they come after my house or my spouse's accounts?

Accepted Answer

Generally only with a personal judgment against you, which requires a guaranty or another basis for personal liability. A judgment against your LLC alone does not reach personal assets. Where a personal judgment exists, jointly held property raises separate questions. A joint bank account can be restrained even where part of the funds belong to a non-debtor, and the non-debtor generally has to come forward to claim their portion. Real property held by a married couple as tenants by the entirety has protections against a creditor of one spouse alone, but the analysis is specific and it is not absolute. Do not assume either way.

Question 11

Can they seize my equipment?

Accepted Answer

Sometimes without going to court at all. After default, UCC 9-609 permits a secured party to take possession of collateral without judicial process, so long as it does so without breach of the peace. It may also collect accounts directly under 9-607. In practice most MCA collateral is receivables, so funders pursue cash flow. If one is threatening equipment, check whether the security agreement actually covers it. A UCC-1 does not itself create a security interest, and blanket filings are often broader than the agreement behind them.

Question 12

Is my advance actually a loan?

Accepted Answer

Courts examine the transaction as a whole. The Second Department has focused on whether the estimated remittance was reasonably tied to actual revenue and whether reconciliation was practically available rather than merely present on paper, alongside whether the term is genuinely open-ended and whether repayment is contingent or effectively absolute. No single factor decides it. Where the funder gets paid regardless of collections and reconciliation never functions, the recharacterization argument is real. It matters because a loan can be subject to usury limits and a genuine purchase of receivables is not, though available defenses also depend on the borrower's status, the applicable threshold, and choice of law.

Question 13

Is a factor rate the same as an interest rate?

Accepted Answer

No, and the gap is large. A 1.4 factor rate means you repay 1.4 times what you received. Annualized, that same deal can exceed 100 percent depending on how fast it is repaid. Shorter terms make the annualized cost higher, not lower. A 1.3 factor repaid over four months costs far more per year than a 1.5 factor repaid over eighteen. Run that number on every position you hold before you evaluate any offer to refinance them.

Question 14

What should I gather?

Accepted Answer

Six things, and this is the same list whether one position is in trouble or eleven are: Every funding agreement, including ones you believe are closed Every entity name and who signed what, including guarantors UCC filings against every relevant debtor entity, in filing order All court papers, even ones you ignored Anything a customer, bank, or processor has sent you Last 90 days of account activity and actual remittances The first question anyone can answer from those documents is whether your reconciliation window is still open.

Behind on your advances? Start with the rights you already have.