Documenting Hardship for an MCA Resolution
6 Records That Show What the Business Can Pay

A hardship explanation becomes useful when the numbers show what changed and what the business can still pay. Six organized records can support that explanation, although no document package entitles the owner to a discount or establishes how a particular funder will respond.

The Executed Agreement File

The conversation has no address without the contract. The first record is the executed financing agreement with its schedules, amendments, and guaranties, establishing the obligation under discussion and the parties bound by it. Where the current demand names a different entity, include the correspondence explaining the change.

Preserve the unedited originals and mark a separate working copy for notes. Where a figure stays uncertain, label it uncertain and state what would resolve it. An incomplete record serves the owner better than a polished schedule that hides one. Every annotation becomes part of the file the funder reads against the business.

The Reconciled Payment History

The second record is the payment history. It reconciles the provider ledger with actual withdrawals and returned entries. The starting figure must be right before any reduction gets proposed.

Pull the bank debits beside the funder credits for the same dates. A debit followed by a return is not a payment, and returned entries deserve their own line. The ledger the owner brings, or fails to bring, sets the ceiling of the discussion. This is where negotiations succeed or fail without notice.

Bank Statements and the Operating Picture

The third record is the set of recent business bank statements across every account that carries material receipts or payments. Selective statements mislead where receipts land in one account and expenses leave another, an extremely common way for a package to fail before it is read, a point brokers will describe as pessimism, which changes nothing about the arithmetic.

Beside the statements sits the current profit and loss statement, showing whether the operation produces a margin before financing payments. Compare the period with the bank activity and explain material gaps between accounting income and cash received. A quarterly statement and a single recent month describe different intervals, and the dates on each page should say so before the reviewer draws the wrong conclusion.

The debits were current. The operation was insolvent. Together these records separate a temporary collection delay from a recurring operating deficit, though many files contain elements of both. Do not invent a percentage decline from memory when the statements can establish the accurate figure.

Receivables, Payables, and the Tax File

The fourth record is the accounts receivable aging, showing which balances stand open and their age. A large receivable is not cash available for next week settlement. The aging does not flatter anyone. Seldom does a reviewer ask for fewer documents.

A receivable is a hope with a date on it. A payable is a promise with the same.

The fifth record is the payables aging with the filed tax returns and any current arrangement or outstanding demand. The Comptroller guidance on problem loans (written for supervised banks, and cited here only for the diligence habit rather than any claim about funder practice) treats the full obligation picture as the precondition to any workout discussion. Counsel can assemble the aging, test the margin, and frame a request the reviewer can verify against the statements. The aging reports are only as honest as the bookkeeping behind them, which is part of the problem.

The Debt Schedule and the Tax File

The negotiation survives or fails on obligations left outside it. The Comptroller problem loan guidance directs supervised banks toward the alternative that maximizes recovery and minimizes risk on each troubled loan, which explains why any reviewer asks what else the cash must cover.

The SBA compromise form and its Form 1150 grounds statement require the obligor to state facts and reasons with identification, loan number, and balance, with a financial statement for each obligor. The MCA package borrows the habit rather than the forms.

The schedule lists each claimant with its balance, payment, collateral or guaranty position, and suit status. Where a figure is disputed, it records both the demand and the basis for questioning it. An accountant explains which tax obligations touch available cash. The tax file reads the way a hospital chart reads, without sympathy and without dispute about the dates. No call presenting these records, even briefly, should precede advice on what the guaranty exposes.

The Event Evidence and the Forward Forecast

The sixth record pairs evidence of the event with a forward cash forecast. A cancellation notice, insurance correspondence, or repair invoice can connect the narrative to an identifiable change.

The forecast sets the proposed payment beside operating needs with its assumptions stated. The forecast math is merciless in a way the narrative never is. Accepted tax compromises carry continuing compliance conditions spanning five years, which is why current filings belong in the package under the IRS guidance on installment agreements and compromise. I have yet to see a complete package rescue a forecast built on hope. Whether the reviewer opens the forecast or the statements first is a question no cover letter can answer.

Present the Package With a Clear Request

Begin with the payment the business can support. Simply name the outcome the forecast assumes instead of leaving the reviewer to infer it. Delancey Street is a settlement company, not a law firm, and it can discuss whether negotiation belongs in the recovery plan while independent counsel reviews litigation and default provisions. Ensure the budget carries service fees and separate legal costs. Ensure the business understands the terms that produce a release after performance. Most owners delay this conversation until the accounts force it. I understand the delay.

Owners often apologize for the state of the books, as if messy records were a moral failure rather than the predictable product of a business consuming itself to meet a daily debit. The reviewer needs arithmetic, not contrition, and the cleanest package still answers to cash within the business reach. Resist the urge to darken the picture beyond what the records show. Start where the capacity meets the obligation and let the records carry the apology, if any is owed. A clear request is extremely rare in these files and extremely welcome.