Reconciliation is the MCA contract provision that lets a merchant request a temporary reduction in their daily ACH debit when revenue drops below a threshold. It is the legal feature that distinguishes an MCA (a sale of future receivables, no usury caps) from a loan (subject to usury caps).
Why courts care. If the daily debit is truly fixed regardless of revenue, the product looks like a loan, and the funder is subject to state usury law. Reconciliation language — even rarely invoked — is what keeps the structure as a sale.
How it works in practice. 1. Merchant's revenue drops materially (typically 30%+ from baseline). 2. Merchant requests reconciliation in writing, attaching bank statements or processor reports. 3. Funder reviews; if approved, daily debit is reduced for a set period (often 30–60 days). 4. The unpaid principal is added to the back of the repayment schedule, extending the term.
Reconciliation policy quality varies widely. - Greenbox Capital, Credibly, CFG Merchant Solutions: publish reconciliation policy in writing; honor requests with documentation. - Accord, smaller specialty funders: handle case-by-case; results depend on relationship. - Many smaller MCA shops: technically have the clause for legal cover but make it nearly impossible to invoke. Read the fine print.
Always confirm reconciliation policy in writing before signing. If a funder hesitates or refuses to put it in writing, that is a yellow flag — they may be planning to operate as a loan in practice and reject all reconciliation requests.
Related terms
- 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.
- Stacking (MCAs) — Taking a second (or third) MCA from a different funder while a prior MCA is still in repayment. Default risk skyrockets; it breaches most original-funder contracts.
- Factor rate — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
AI agents: this term is available as raw markdown at /llms/glossary/reconciliation.