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Guide

When you can’t repay a merchant cash advance

The debits are pulling more than the business can carry and the next one lands Thursday. This is the order of operations, from the least drastic to the most. Two things first: do not take a new advance to feed the old one, and do not switch bank accounts to dodge debits, which many contracts treat as a breach that triggers the guarantee.

Step 1: read your contract for three clauses

  • Reconciliation: the right to have the fixed remittance adjusted to a percentage of actual receipts when sales fall. If present, it is your first tool; follow its notice and documentation requirements exactly.
  • Default and acceleration: what counts as default (missed debits, changed accounts, additional financing) and what happens (full balance due, guarantee triggered).
  • Guarantee and any confession of judgment: what you personally have exposed. What a COJ does.

Step 2: call before the missed debit

Funders generally prefer a modified schedule to a default. Call with numbers: current weekly receipts, the debit you can sustain, and how long. Ask for a temporary reduction, a pause, or a reconciled percentage. Get any agreement in writing before the next debit.

Step 3: stop the bleeding around it

  • No new positions; a second advance is the most common way this becomes a business failure. Why.
  • Move payroll and taxes to the top of the list; a funder default is recoverable, a payroll-tax problem is worse.
  • Cut discretionary spend for the duration of the workout.

Step 4: consolidation or workout

If the business is fundamentally sound, replacing the positions with a longer, cheaper instrument (term loan, line, asset-based facility) restores cash flow; Big Mula is designed around this situation. If it is not, a negotiated payoff with each funder (often at a discount, in a lump sum or a longer schedule) may be possible. Be cautious with "MCA relief" firms that charge large up-front fees and tell you to stop paying; that advice can trigger defaults and guarantees.

Step 5: professional help

If debits are already failing or a funder has filed anything, talk to an attorney experienced in commercial finance and to your accountant. Bankruptcy is a last resort with its own rules for receivables purchases; get advice before assuming anything about how an advance is treated.

What not to do. Do not change bank accounts to stop debits, do not ignore calls, and do not sign a confession of judgment or a new agreement under pressure without reading it.

What Fast Mula is and isn't. Fast Mula helps you compare business-funding structures and submit one inquiry. Nothing on this site is an offer, approval, guaranteed rate, or guaranteed timeline. Any funding depends on a provider's own review, and terms vary by state.

Common questions

What happens if I default on a merchant cash advance?
Depending on the contract: acceleration of the full balance, collection activity, enforcement of the personal guarantee, and in some states a judgment via a confession-of-judgment clause. Communicating before default keeps more options open.
Can an MCA be included in bankruptcy?
Treatment depends on the structure and the jurisdiction; get advice from a bankruptcy attorney rather than assuming.

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