Shopify and DTC Brands
8 Paths for Assessing MCA and Revenue Based Debt

The repayment formula does not tell you whether the obligation is a loan or a purchase of receipts. A Shopify merchant should identify the product and the counterparty before choosing a path out of debt that consumes the operating cash of the brand.

A loan issued through Shopify Capital, an outside MCA and another revenue based agreement may each require an extremely careful response. The eight paths below are options to assess with counsel, not promises that every account can be reduced or canceled.

Confirm the Product Before Choosing a Path

Shopify United States Capital guidance identifies WebBank issued secured loans and distinguishes fixed fee from monthly fee structures, with minimum payment milestones and a maximum term. Percentage based collections should never be mistaken for an unlimited repayment period.

Pull the executed agreement for every obligation against the store, since a platform loan, a third party MCA and a revenue based facility from another provider create different counterparties with different rights even where the debits leave the same account. The brand that files all three under one name will misstate at least one of them.

Complete the Platform Loan on Verified Terms

The existing loan agreement determines the amount required to complete the obligation. Obtain the current balance with the full transaction history before directing a final transfer, and confirm that payments already collected appear in the calculation.

Do not assume that a statement about early payment under one fee structure applies to another. For an outside MCA, request its own payoff terms through its own counterparty.

Request the Adjustment the Agreement Permits

A reconciliation provision can supply a process for adjusting remittances to receipts, depending on the contract. Locate the required records and the period used for the calculation, then distinguish gross orders, refunds and cash received, since the agreement definition of covered sales may differ from the amount the owner regards as operating revenue.

The New York decision in LG Funding, LLC v. United Senior Properties of Olathe, LLC considers reconciliation and other features when assessing whether repayment is absolute. The decision does not convert every financing dispute into a successful challenge, and its analysis (which defenders of the MCA industry will insist proves the purchase model lawful) turns on the substance of each agreement rather than the label any provider chose.

Submit accurate information and preserve the response. This path changes the payment only to the extent established by the applicable terms or an accepted modification, and it should never be described as debt forgiveness.

The reconciliation clause functions the way a smoke detector functions in a building already scheduled for demolition: present, operational, and beside the point until someone reads the inspection report.

Negotiate Terms the Business Can Perform

A settlement proposal begins with an identified source of payment. The brand should account for inventory, fulfillment, returns and obligations tied to orders already accepted, then separate funds available now from projected sales that depend on a launch no customer has yet funded.

The proposed arrangement should name the balance resolved, the payment dates and the conditions for release. A lower debit by itself changes nothing about the remaining obligation.

If several obligations press on the same receipts, maintain a separate ledger for each. An accepted offer from one counterparty binds no other, and the forecast should show the cost of completing orders already placed rather than count the same cash for production and for debt service. The owner should also test a weak season. A plan that performs only after a successful campaign remains a proposal with an extremely large assumption.

Replace Financing Only When the Full Calculation Improves

An actual replacement offer should identify which obligations it will retire. New money that leaves the earlier advance active may increase the commitments against future receipts while appearing to relieve them.

Compare total payments with the timing of those payments. Review collateral and individual undertakings before acceptance. Obtain the required payoff and release documents from the existing counterparty, since the new lender expectation that an account will close is not evidence that it has closed.

Obtain Legal Review of a Supported Dispute

Counsel should examine the agreement, the communications and the actual payment history before asserting a defense or claim. A product label or a general criticism of MCA financing is insufficient, and a successful negotiation should never be confused with a court ruling since the two outcomes impose different obligations on different parties.

If court papers arrive, the response follows its own timetable. Settlement discussion establishes no extension.

Ask Whether Delancey Street Fits the MCA Portion

Delancey Street can review the MCA accounts through its merchant cash advance settlement service, which offers a free initial review in confidence. Bring the combined payment schedule rather than only the most recent advance.

The company is a debt settlement provider, not a law firm. Independently licensed counsel handles legal representation and disputes concerning the contracts, and counsel should ensure any proposal addresses the correct counterparty for each balance.

Confirm which accounts the engagement includes and review fees beside creditor payments. No provider can ensure acceptance by every funder, so the plan should state what happens if one counterparty rejects the proposal while another agrees. Simply keep the assumptions in writing.

Close or Restructure With Every Obligation Named

Where the business cannot support its commitments, counsel should assess the formal options with the consequences for the entity and any individual obligor set out in full. Closure never assumes away every debt.

An asset sale requires review of creditor rights with the money available after the transaction. New York UCC Section 9-513 addresses termination statements under specified conditions, and a final payment authorizes no debtor to remove a filing without the required procedure and authority.

Assign responsibility for releases and any required filing actions. The brand needs an outcome that fits the product it accepted and the business it can now sustain, and that outcome arrives only after refusing to treat every percentage payment as the same obligation. I drafted the preceding paragraph on a rainy Tuesday, which may account for its bluntness.