3 Points Never to Say to an MCA Underwriter During a Reconciliation

The adjustment a merchant seeks must already exist inside the clause invoked to obtain it. Reconciliation is an exercise of a written term under stated conditions rather than a plea for patience, and the three statements below endanger the request because each contradicts the merchant own papers or the law that will read them.

What follows is a diligence checklist rather than a script. Procedures differ by funder and agreement, and counsel should review the clause and ensure the records match its requirements before the owner places the call.

How New York Courts Read a Reconciliation Clause

In the LG Funding substance test, the New York appellate court examined reconciliation alongside other provisions when asking whether repayment under the agreement was absolute. The decision preserved a defense on the particular record before it. It established no universal script for requesting an adjustment, though its factors continue to shape how later courts approach the same question.

The Bridge Funding majority analysis applied the same tripartite inquiry to provisions that required adjustment of the remittance amount upon request based on changes to revenue. The court credited the provisions as not illusory where the agreement gave the funder no sole discretion over adjustments and imposed consequences for noncompliance. Other provisions may matter, though in practice they tend to point the same direction.

A partial dissent in the same case would have asked whether the revenue estimate was realistic and whether reconciliation was usable in practice. That two part test is not the holding, and counsel should never present it as the rule. It remains useful only as a preview of the attack lines a merchant loose statement can supply.

The First Point: Never Disavow the Revenue Estimate

The agreement recites an estimate of revenue against which fixed debits were set, and the merchant signed that recital at funding. A statement on the call that the estimate was fictional, inflated, or never read does not invite sympathy. It hands the other side a written contradiction between the owner present position and the signed representation. What the merchant affirms, or disavows, on the call will be measured against the signed papers.

A reconciliation clause resembles a fire escape inspected only during the fire: its presence on the diagram matters less than whether the door opens when tested. Where receipts have fallen and the margin is extremely narrow, describe the period and the figures from the books without characterizing the original estimate, and preserve the records that support the current numbers. An accurate total can mislead where its interval is left uncertain, so identify the dates the figures cover.

Rarely does a clause answer every question the call will raise. Where the estimate itself appears wrong, state the discrepancy in plain figures and ask counsel about its significance before offering the underwriter a theory of the case. Resist the urge to fill silence with concessions. The impulse to explain is human.

The Second Point: Never Admit the Procedure Was Ignored

Most clauses condition adjustment on notice and on financial records supplied in a stated form, and the majority in Bridge credited provisions that operated upon the merchant request. An owner who tells the underwriter that no request was ever made, or that the required statements were never sent, concedes nonuse of the very procedure now invoked. A figure described as affordable next quarter deserves a forecast before it is stated on the record. The request of five pages supported by complete records outperforms the apology, however sincere the apology sounds.

Before stating that the provider ignored every prior request, collect the messages, portal submissions, and responses, since the owner may remember a telephone conversation the agreement never treated as notice. The factual account should separate those events (the clause controls, though no clause answers every question the call will raise). Where no request was made, state what is requested now and obtain advice about the earlier period rather than inventing history that the file cannot support.

Review and analyze the calculation behind the current debit against the agreement text. The business and the provider may apply different definitions to receipts, and establishing that difference precedes any claim about misconduct. The underwriter documents the call in order to protect the funder position, so every figure stated becomes part of that record. Simply state the period, the figures, and the adjustment the clause supports for those figures.

The Third Point: Never Blur the Guarantor With the Borrower

The guarantee is separate and distinct from the merchant contract. Statements on the call should keep that separation extremely clear.

An owner should not expand a business request into a new promise of payment from personal assets, even casually, to move the discussion forward. The owner should not deny an existing guarantee without reading the signed instrument. The document, with its outlandish precision about dates and amounts, determines the obligation asserted.

Where the provider seeks a new guarantee or acknowledgment as a condition of adjustment, consult and contact counsel before signing. Whether the underwriter noted the admission or merely filed it is a question the merchant will never see answered.

What the Written Request Should Carry

The request should be intelligible to a reader who has never handled the account: the agreement reference, the period, the requested adjustment, and the records supporting it. List the attachments, retain a copy of the package, and follow any telephone summary with an accurate written account that invites correction of misunderstanding.

Delancey Street offers a free confidential initial review of business debt concerns, and a merchant whose receipts no longer support the debit can ask whether the account is eligible for settlement assistance alongside any reconciliation effort. The company provides debt settlement services as a settlement company and coordinates legal matters with independent counsel, since it is not a law firm. Counsel should ensure that the reconciliation position and any broader resolution discussion rest on the same estimate, the same procedure, and the same obligation records, since the file the merchant builds on the call becomes evidence in the case against the merchant where the dispute proceeds.