Pandemics, hurricanes, wildfires, floods, and other disaster events directly trigger MCA force-majeure and reconciliation provisions — the only category of revenue disruption with clear legal precedent forcing funder adjustment.
Force majeure and reconciliation.
Most modern MCA contracts include both: - Force majeure clauses: enumerated catastrophic events that suspend obligations (acts of God, government orders, natural disasters, pandemics, war). - Reconciliation clauses: provisions allowing payment adjustment when actual revenue declines materially below underwritten projections.
Force majeure is the strongest legal protection because it suspends contractual obligations rather than merely adjusting them.
COVID precedent (2020–2022).
The COVID pandemic created the most extensive MCA reconciliation precedent in industry history: - Government shutdown orders forced businesses (restaurants, gyms, salons, retailers) to close. - MCA daily ACH could not be paid because revenue dropped to zero. - Litigation followed: dozens of cases tested whether funders were required to suspend ACH. - Courts in NY, FL, NJ, and other states largely sided with merchants, ruling that: - Government shutdown orders constituted force majeure. - Funders had to suspend ACH during shutdown. - Funders had to honor reconciliation requests post-reopening. - Confession-of-judgment filings during COVID were vacated in many jurisdictions.
The precedent now governs how funders treat pandemic / disaster events.
Disaster declarations.
Federal and state disaster declarations create automatic protections: - Presidential disaster declaration (FEMA-administered): triggers federal disaster loan eligibility (SBA EIDL/disaster loans), tax relief, and grounds for force-majeure claims. - State disaster declaration: similar effect at state level. - SBA disaster declaration: triggers SBA disaster loan availability for affected businesses.
MCA funders typically suspend daily ACH automatically for businesses in declared disaster zones for 30–60 days, then transition to reconciliation review.
Documentation requirements.
To invoke force majeure or pandemic reconciliation: - Evidence of disaster (FEMA declaration, government shutdown order, news coverage). - Specific impact on the business (closure dates, revenue documentation, physical damage). - Insurance claim documentation (if applicable). - Reopening plan and timeline. - Revenue documentation pre- and post-event.
Funder behaviors.
Funder response to disaster events varies: - Top-tier funders (Forward Financing, Credibly, CAN Capital, Kapitus): typically proactive — pause ACH, contact merchants, offer extended terms. - Mid-tier funders: respond to merchant requests; generally cooperative but slower. - Bottom-tier funders: may attempt to continue ACH and force NSF defaults; litigation often needed.
Post-COVID, most funders have updated procedures to handle disaster events more proactively.
Insurance interaction.
Business interruption insurance (BI) can cover lost revenue during disaster events: - Civil-authority coverage (government shutdown). - Extra-expense coverage (relocation, alternative operations). - Property damage coverage (if physical damage occurred).
BI proceeds can fund MCA payments during the disaster, potentially avoiding the need for force-majeure invocation. COVID exposed widespread underinsurance — many policies excluded pandemic specifically.
SBA disaster loans.
SBA EIDL (Economic Injury Disaster Loans) provide working capital during declared disasters: - Up to $2M at 4% interest. - 30-year terms. - 12-month payment deferral. - Can be used to pay existing debt including MCA in some cases.
EIDL was used extensively during COVID; over $400B disbursed industry-wide.
Math example.
Florida restaurant has $50K MCA outstanding, $700/day ACH. Hurricane causes 3-week shutdown.
- Day 0: Hurricane makes landfall; restaurant closes.
- Day 1: Owner emails MCA funder requesting force-majeure suspension; attaches FEMA disaster declaration.
- Day 3: Funder confirms 30-day ACH suspension.
- Day 14: Restaurant partially reopens (takeout only); revenue at 35% of normal.
- Day 21: Restaurant fully reopens with structural repairs ongoing; revenue at 60%.
- Day 35: Funder transitions from suspension to reconciliation; ACH reduced to $400/day for 90 days.
- Day 125: Revenue at 85%; ACH renegotiated to $600/day; term extended by 5 weeks.
- Day 365: MCA paid off.
Without force-majeure invocation, restaurant would have defaulted within 7 days of closure.
Long-term disaster preparedness.
Disaster-prone businesses should: - Carry adequate BI insurance with pandemic / civil-authority coverage. - Build emergency cash reserve (3–6 months of fixed costs). - Pre-establish SBA disaster loan relationship. - Negotiate MCA force-majeure clauses with documented examples. - Maintain off-site data backups for rapid resumption.
Common confusions.
First, "MCA funders are exempt from force majeure because they bought receivables, not lent money." False — courts have ruled force majeure applies regardless of structural characterization.
Second, "I need to be in the disaster zone to claim force majeure." Generally true — but disaster-zone definitions can be broad and include economic-impact zones.
Third, "Force majeure is the same as reconciliation." False — force majeure suspends obligations entirely; reconciliation adjusts them.
Fourth, "Disaster events extend the MCA term automatically." Generally yes — suspended payments push out the payoff date.
Fifth, "Pandemic exclusions in BI insurance also exclude MCA force majeure." False — they are separate contracts with separate language.
As of 2026-06-29, Fundnode advises disaster-exposed merchants (coastal, wildfire, flood, tornado regions) to maintain explicit force-majeure language in MCA contracts and to document disaster-response procedures including immediate funder notification protocols.
Related terms
- MCA during a key supplier loss — A key supplier going under, demanding cash terms, or cutting allocation can interrupt revenue more severely than customer loss — proactive funder communication and inventory bridging financing become essential.
- MCA during foreclosure — Real-estate foreclosure does not directly affect MCA contractually, but the loss of business location often triggers MCA default via revenue collapse; merchants should negotiate forbearance before the foreclosure sale completes.
- Reconciliation (MCA) — A contract provision allowing merchants to request a reduced daily debit when revenue drops. Required for MCAs to remain legally a 'sale,' not a 'loan' in most states.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/mca-during-pandemic-or-disaster.