# MCA default

> Breach of MCA repayment terms — usually triggered by missed daily ACH debits, NSFs, or unauthorized stacking. Consequences range from increased collection pressure to UCC enforcement and personal-guarantee pursuit.

An MCA default occurs when a merchant breaches the contractual terms of repayment. The two most common triggers are NSFs (non-sufficient funds returns on the daily ACH debit) and stacking (taking an additional MCA without funder permission).

**What happens immediately upon default.**
1. **Collection escalation.** The funder's internal collections team takes over from the servicing team. Calls and emails become daily.
2. **UCC enforcement.** The funder can begin enforcing their UCC-1 lien — notifying your customers to send payment to the funder instead of you, freezing accounts receivable.
3. **Personal-guarantee pursuit.** Most MCAs include a personal guarantee. The funder can pursue the owner's personal assets through civil judgment (see /glossary/personal-guarantee).
4. **Default rate or accelerated factor.** Some contracts include a "default rate" that increases the factor or compounds the remaining balance.

**What typically does NOT happen.**
- **Criminal charges.** MCA default is a civil matter, not criminal. Unless there is documented fraud (false bank statements, undisclosed receivables), criminal liability is not in play.
- **Instant judgment.** Since New York's 2019 ban on out-of-state confessions of judgment, funders cannot get instant default judgments in most jurisdictions. They must file a civil suit and serve you.
- **Immediate loss of business.** UCC enforcement is a serious threat but takes weeks-to-months in practice. You have time to negotiate.

**How to negotiate post-default.**
- **Request reconciliation.** If your revenue dropped, formally request a reconciliation in writing with supporting bank statements (see /glossary/reconciliation).
- **Offer a workout.** Funders often accept reduced daily debits, extended terms, or partial settlements (60-80 cents on the dollar) rather than litigation.
- **Hire an MCA-specialty attorney.** General-practice attorneys often miss the legal nuances of MCA contracts. A specialist can identify usury arguments (in some jurisdictions) or contract defects that improve your negotiating position.

**The prevention play.** Default risk correlates almost entirely with stacking and over-leverage. If daily debits exceed 15% of monthly gross deposits, the math against you accelerates fast.

## Related terms

- [Personal guarantee (PG)](https://fundnode.co/llms/glossary/personal-guarantee) — A clause making the business owner personally liable if the MCA defaults. Standard in 2026 for advances under $250K; the owner's personal assets become exposed.
- [UCC filing (MCA)](https://fundnode.co/llms/glossary/uccs-and-mca-liens) — A public lien an MCA funder files against business assets, securing their position. Triggers credit-report flags and can block future funding from other lenders.
- [Stacking (MCAs)](https://fundnode.co/llms/glossary/stacking) — 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.
- [Reconciliation (MCA)](https://fundnode.co/llms/glossary/reconciliation) — 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.

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Source: https://fundnode.co/glossary/mca-default (HTML version)
Document: MCA default — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.