What's the difference between default and acceleration?

Default is the event — a specific contract violation. Acceleration is the consequence — the funder declares the entire remaining balance due immediately rather than continuing the daily ACH schedule. Most MCA contracts include acceleration triggered by any default. The full unpaid balance + fees becomes due in one demand.

Does one missed ACH payment trigger default?

Usually not technically, but it can. Most contracts allow 2-3 NSFs or missed ACHs before formal default, but the language is often broad. 'Material breach' triggers can be interpreted by the funder to include a single missed payment. In practice, funders rarely accelerate after one missed payment — they want resolution, not litigation. But the contract gives them the right to.

If I change banks, does that trigger default?

Often yes. Most MCA contracts include language requiring you to maintain your business deposits at the bank account the ACH debits from, and not change banks without funder approval. Switching banks without notice can be characterized as evading payment — even if your intent was innocent. Always notify the funder in writing if you change banks.

Can opening a second MCA from a different funder trigger default on my first MCA?

Yes. Most MCA contracts include anti-stacking provisions that make any second-position MCA an automatic default event. Even if you're current on the first MCA payments, the funder can accelerate on grounds of stacking. This is one of the most common default triggers stacking merchants don't realize they're activating.

What about a tax lien or judgment filed against me?

Many MCA contracts include 'material adverse change' clauses that treat new tax liens, judgments, UCC filings, or significant litigation as default events. The theory is that these change your financial profile and put the funder's collection at risk. The contract often gives the funder discretion to accelerate based on this language alone.

Can I cure a default once it's declared?

Sometimes, depending on the contract and the funder. Some contracts include explicit cure periods (e.g., 'Merchant has 5 business days to cure the default by paying all amounts due'). Others don't. Even where cure isn't explicit, funders often accept cure if the merchant is responsive and the default is procedural rather than financial distress. But contractually, the funder isn't required to accept cure once acceleration is declared.

MCA Default and Acceleration Clause: The 7 Triggers Most Merchants Miss

A default triggers acceleration: the full remaining balance becomes due immediately. Most merchants think default means 'missed payments.' Most MCA contracts define it much more broadly. Here are the 7 default triggers merchants miss most often.

What acceleration actually means

Without acceleration, an MCA defaults to its daily ACH schedule — the funder gets paid gradually over 6-12 months. With acceleration triggered, the full remaining balance plus fees becomes due in one demand. If the original advance was $50,000 at a 1.32 factor and you've paid $25,000 of the $66,000 obligation, acceleration declares the remaining $41,000 immediately due.

The mechanism that enforces this varies:

COJ filing — fastest path to judgment + account freeze
Traditional litigation (slower, costlier for the funder, more defensible for you)
UCC enforcement against business assets if collateral was pledged
Personal guarantee enforcement against your personal assets

The 7 default triggers merchants miss

1. NSF cascade — multiple missed ACHs in a short window

Most contracts allow 2-3 NSFs before formal default. The trigger is usually defined as "X NSFs in a Y-day rolling window" (e.g., 3 NSFs in 30 days).

What merchants miss: the window is rolling, not calendar-based. Three NSFs spread across May 25, June 10, and June 22 is still a 30-day window violation. Your best defense: keep at least 1 week of operating cash buffer in your ACH-source account.

2. Bank account changes without notice

Almost every MCA contract requires you to maintain the ACH at a specific account and notify the funder of any change.

What merchants miss: opening a new account at the same bank is sometimes treated as evading payment under broad contract language. Always notify the funder in writing if you open new accounts, even at the same bank.

3. Anti-stacking provisions (second MCA from another funder)

Most contracts prohibit taking a second MCA without written consent from the first funder. Violation is automatic default — even if you're current on payments.

What merchants miss: the first funder may not realize you stacked until they pull a UCC search months later. Then they accelerate on grounds you defaulted at the moment of stacking, claiming the full obligation immediately due. Don't stack.

4. Material adverse change (MAC)

MAC clauses give the funder broad discretion to declare default if your financial situation materially worsens. Triggers can include: new tax liens, judgments against you or the business, large new UCC filings, significant litigation, loss of a major customer, regulatory enforcement actions.

What merchants miss: the funder doesn't need to wait for you to miss a payment. The MAC trigger lets them accelerate based purely on changed circumstances.

5. Closure or material change of the business

Selling the business, dissolving the entity, materially changing the business model, or even closing for an extended period can all trigger default under most contracts.

What merchants miss: a temporary closure for renovation, owner illness, or seasonal break can technically trigger this language even though no payments are missed. Notify the funder in writing before any extended closure.

6. Failure to maintain insurance or licenses

Many contracts require maintaining business insurance, professional licenses, or state-specific operating permits as ongoing covenants. Lapse can be an event of default.

What merchants miss: renewing your liability insurance late, letting a contractor license expire briefly, missing a state filing deadline — all can technically trigger this. The funder rarely enforces this in isolation but uses it as additional grounds when other defaults occur.

7. Misrepresentation in the original application

If the funder later discovers that information in your original application was inaccurate (revenue numbers, time in business, existing debt obligations), that's a default event under most contracts.

What merchants miss: rough estimates or rounded numbers in the application can be characterized as material misrepresentation if the funder wants to accelerate. If your actual revenue is materially lower than what you reported, you have contract exposure even if you're current on payments.

How fast acceleration moves to enforcement

Once default is declared and acceleration triggered, the timeline depends on whether the contract has a COJ:

With COJ: 7-25 days to judgment entry and account freeze. See our COJ analysis for detailed timeline.
Without COJ: 60-180 days for traditional litigation to result in judgment, then weeks more for enforcement actions.

The COJ vs no-COJ distinction is the single largest factor in how dangerous a default situation becomes. Contracts without COJ give you time to negotiate, cure, file bankruptcy if needed, or assemble legal defense. Contracts with COJ give you 1-3 weeks before your accounts are frozen.

What to do if default has been declared

Don't panic, but move fast. The first 24-72 hours after default declaration are critical. Funders are often willing to negotiate cures in this window.
Read the default declaration letter carefully. Look for: specific default event cited, total amount accelerated, cure period if any, contact for negotiation.
Contact a specialty MCA defense attorney immediately. Even before calling the funder. The attorney can advise on whether the cited default is legitimately triggered, whether there are defenses, and how to negotiate from a stronger position.
Don't make partial payments without legal advice. Partial payments can be characterized as acknowledgment of the full debt, complicating defenses.
Document the funder's prior breaches. If the funder failed reconciliation requests, made enforcement threats outside contract terms, or otherwise breached, document everything. These become defensive positions.
Consider bankruptcy if truly distressed. A Chapter 7 or 13 filing triggers automatic stay that halts MCA enforcement immediately. Consult a bankruptcy attorney before assuming it's not an option.

Frequently asked questions

What's the difference between default and acceleration?: Default is the event — a specific contract violation. Acceleration is the consequence — the funder declares the entire remaining balance due immediately rather than continuing the daily ACH schedule. Most MCA contracts include acceleration triggered by any default. The full unpaid balance + fees becomes due in one demand.
Does one missed ACH payment trigger default?: Usually not technically, but it can. Most contracts allow 2-3 NSFs or missed ACHs before formal default, but the language is often broad. 'Material breach' triggers can be interpreted by the funder to include a single missed payment. In practice, funders rarely accelerate after one missed payment — they want resolution, not litigation. But the contract gives them the right to.
If I change banks, does that trigger default?: Often yes. Most MCA contracts include language requiring you to maintain your business deposits at the bank account the ACH debits from, and not change banks without funder approval. Switching banks without notice can be characterized as evading payment — even if your intent was innocent. Always notify the funder in writing if you change banks.
Can opening a second MCA from a different funder trigger default on my first MCA?: Yes. Most MCA contracts include anti-stacking provisions that make any second-position MCA an automatic default event. Even if you're current on the first MCA payments, the funder can accelerate on grounds of stacking. This is one of the most common default triggers stacking merchants don't realize they're activating.
What about a tax lien or judgment filed against me?: Many MCA contracts include 'material adverse change' clauses that treat new tax liens, judgments, UCC filings, or significant litigation as default events. The theory is that these change your financial profile and put the funder's collection at risk. The contract often gives the funder discretion to accelerate based on this language alone.
Can I cure a default once it's declared?: Sometimes, depending on the contract and the funder. Some contracts include explicit cure periods (e.g., 'Merchant has 5 business days to cure the default by paying all amounts due'). Others don't. Even where cure isn't explicit, funders often accept cure if the merchant is responsive and the default is procedural rather than financial distress. But contractually, the funder isn't required to accept cure once acceleration is declared.

Default and acceleration — the 7 triggers that can collapse an MCA overnight.