The phone is ringing. The ACH bounced. The funder’s relationship manager has gone from polite to threatening in under a week. Default is not an event, it is a phase, and what you do in the first seventy-two hours decides how the next ninety days play out. This is the action checklist.
STEP 01 – HOUR 0-72
Move Operating Cash
Open new account at unrelated bank. Revoke ACH authorization in writing.
STEP 02 – HOUR 0-72
Pull Every Contract
Locate PG, COJ, and choice-of-venue clauses. NY-governed COJs entered in days.
STEP 03 – WEEK 1
Triage by Leverage
Rank funders by enforcement power, not balance size. COJ-holders go first.
STEP 04 – WEEK 1
Build Cash Position Doc
60 days bank statements, 13-week cash flow, A/R and A/P aging.
STEP 05 – WEEK 2
Open Negotiations
Written position statement to each funder. Invoke reconciliation clause.
STEP 06 – WEEK 3
Pre-Position Defense
Engage independent counsel before suit so a licensed attorney can review the file.
Priority action checklist for the first three weeks after default.
Hour Zero Through Hour Seventy-Two
Move your operating cash. The funder has a routing number and an account number from the original ACH authorization. Even if you have revoked the authorization in writing, expect attempts. Open a new operating account at a bank that has no relationship with the funder, transfer working capital, and route customer payments to the new account.
Pull every MCA contract you have and locate three things so an attorney can review them: the personal guarantee, the confession of judgment clause, and the choice of venue. Confessions of judgment can move quickly once filed, and a licensed attorney can explain the timeline that applies to a specific contract.
Stop talking to the funder on recorded lines without a plan. Anything you say becomes part of the file. Acknowledging the balance, admitting hardship, or promising payment all change your negotiations position. A short written response stating that you are evaluating options is enough.
Week One: Triage the Stack
If you have more than one MCA, rank them. The ranking is not by balance, it is by leverage. The funder with the COJ goes to the top. The funder who has already filed a UCC lien notice goes next. The funder with the strongest customer notification language follows. The funder with the weakest contract and the slowest enforcement history can wait.
Triage by leverage, not by loudness. The funder yelling on the phone is rarely the funder who can do the most damage. Read the contracts.
Build a real cash position document. Last sixty days of bank statements, a thirteen-week cash flow forecast, accounts receivable aging, and accounts payable aging. This is the package every senior advisor and every independent attorney will ask for. Have it ready.
Week Two: Initiate Negotiations
Reach out to each funder in writing. The opening is not an offer, it is a position statement: the business is in distress, payments cannot continue at the contracted rate, and you are open to a structured resolution. Funders settle aged defaults at significantly lower rates than current accounts, but most will not lock in a settlement until the file is sixty days delinquent.
Common resolution paths:
Reduced lump sum settlement at thirty-five to sixty cents on the dollar
Extended payment plan at the full balance over twelve to thirty-six months
Hybrid: down payment plus monthly installments
Reconciliation under the contract’s own reconciliation clause if revenue dropped
The reconciliation clause is the most underused tool in the MCA contract. If the contract requires the funder to true up payments to actual receipts and the receipts dropped, the funder has a contractual obligation, not a favor to grant.
Four common resolution structures and the share of face balance each typically captures.
Week Three: Prepare for Legal Escalation
If any funder has threatened a lawsuit, filed a UCC notice, or has a COJ in hand, this is the point to involve a licensed attorney. An independent attorney from a vetted referral network can review the file at this stage, rather than after an account is restrained.
Reviewing a file early generally costs far less than addressing a restrained account after judgment. Legal arguments that come up in MCA litigation include usury reclassification, contract unconscionability, whether the transaction has true-sale characteristics, and how a COJ was executed. Whether any of these apply to a specific contract, and whether to raise them, is for a licensed attorney to assess and act on.
Delancey Street senior advisors handle the financial negotiation. When the file needs court work, we refer you to an independent attorney from our network who has handled MCA litigation specifically.
What Not To Do
Do not take a new MCA to pay the old MCA. Stacking is what got most defaulted borrowers into the spiral. Do not transfer business assets to a relative or a new LLC, that is a fraudulent transfer and creates personal liability beyond the original debt. Do not ignore certified mail.
Default is survivable. Thousands of small-business owners come out the other side with the business intact or wound down on their own terms. The difference between the survivors and the ones who lose everything is almost always whether they acted in the first three weeks.
Delancey Street is a business debt-relief company, not a law firm. When a matter requires legal work, we refer you to an independent attorney from our referral network; the attorney–client relationship is between you and that attorney.
MCA Loan Default Help Can Help Stop The Bleeding Before The Bank Account Freezes
MCA loan default help means there's a coordinated legal, and settlement, intervention which is designed to stop ACH withdrawals, prevent/reverse bank account freezes, it can challenge confessions of judgement, and negotiates the outstanding balance down to a lump sum amount. Usually, a merchant cash advance default triggers consequences within 7-14 days, not the 30-90 days a traditional loan default would allow for. The three remedies are settlement, legal defense, and in some cases, bankruptcy under Subchapter V. Acting in the first two weeks, after default protects the most leverage.
What Counts as an MCA Default?
Merchant cash advances aren't legally structured as loans, so the consumer protection rules that govern typical credit do not apply. There's no Fair Debt Collection Practices Act protection on behalf of business MCA borrowers. There's no federal truth in lending APR disclosure requirement at origination - but now there are state laws coming into effect. Most agreements give the funder direct ACH access to your operating account. That access is the tactic used to turn a missed payment into an emergency.
Missing one, or more, daily/weekly schedule ACH withdrawals can be a trigger for a default under most MCA contracts. If you get an NSF, that can also be a trigger for a default. In addition, changing, or closing, the bank account the funder has been debiting can also be a trigger. If you put a block on the funder's ACH at the bank, without talking to them/informing them, this can be a reason for default too. If you've experienced a significant decline in revenue, and you can't afford to make your payments anymore - this too, can be a reason for a default. Stacking one MCA on top of the existing one, is something many borrowers do - but it's expressly prohibited. Another reason for a default can be filing for bankruptcy, or selling your receivables to someone else like a factoring company, when you already sold them.
The First 30 Days After Default
On days 1-7, the funder is treating the missed payment as a breach, and accelerates the entire remaining balance. For example, a $100,000 advance, at a 1.4 factor rate, becomes $140k due in full immediately. Outbound collection calls begin within 24 hours, and escalate quickly. Many funders will contact your bank, to inquire about balances, or will attempt repeated ACH pulls. If a PG was signed, the funder begins evaluating personal asset exposure during the window.
Days 7 To 14
If a COJ was signed, the funder files it with a NY county clerk, and gets a judgement without a hearing. The funder then issues a restraining order to your bank. The bank is legally, at this point, required to freeze the account immediately. This means your payroll bounces, vendor ACHs reverse, rent checks are returned, and worse. If a PG was signed, personal accounts and joint accounts can be restrained.
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