# 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.

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)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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)](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.
- [Factor rate](https://fundnode.co/llms/glossary/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.

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