Small Business Debt Assistance
5 Places to Start When Payments Compete

The next creditor to call should not acquire the power to decide which bills the business pays, although that is what happens when the owner has no written priority plan.

Small business debt assistance begins with sorting obligations by their consequences and the expertise each one requires. An MCA negotiation, a tax balance, and a lawsuit may share one bank account without sharing one solution. Five starting places bring order to that competition.

Operating Facts in One Place

With debits arriving daily and notices arriving weekly, the owner needs a single current list of obligations showing the creditor, the payment schedule, the security claimed, and any personal guaranty. A triage nurse does not treat the loudest patient first. The owner should not pay the loudest creditor first.

The list need not be elegant. It needs to identify what is owed and the dates that control the next decision, and an uncertain balance should be marked for confirmation rather than entered exactly from memory. Beside the list, set down the cash required for the next operating period, because payroll, tax deposits, and necessary suppliers come before the account balance becomes a fund for the most persistent caller.

The list should be current and complete. Seldom does a payment plan survive first contact with the ledger. Simply assemble the documents before answering with a new promise, since a workable plan begins with capacity rather than with the creditor preferred installment.

Delancey Street and MCA Pressure

Delancey Street operates as a debt settlement company. Legal work goes to independently licensed counsel. The company offers a free confidential initial review for businesses confronting MCA distress, and the Delancey Street initial review tests whether negotiation fits the accounts and the resources behind them.

Confirm eligibility for each obligation, particularly ordinary commercial loans or tax debts that should not be assumed to fall within the same engagement. Ask who will contact the funders, what information they need, and how the company calculates its fee, because a forthright explanation includes the possibility that a creditor refuses the proposed arrangement. The demand file deserves the same separation recommended above; a summons buried in statements becomes a default.

Enrollment can slow the phone calls. It cannot stop a lawsuit already filed. The distinction is decisive, because a person negotiating a commercial resolution does not become the attorney of record merely through forwarded papers. An adviser can review and analyze withdrawals across several advances, while counsel should ensure disputed positions receive proper examination and ensure court documents meet their deadlines.

Whether the MCA Is a Loan

The Second Department decision in LG Funding and the MCA characterization factors directs courts to examine substance rather than labels, weighing whether repayment is absolute through factors that include *reconciliation* in practice, a finite term, and recourse in bankruptcy. The presence of a clause proves little by itself. Its operation proves nearly everything. A funder that adjusts debits when receipts fall holds the stronger evidentiary position.

A reconciliation right that cannot be exercised weighs little.

Opposing counsel in these cases usually opens the first conference call by testing whether anyone read the reconciliation provision, in order to establish whose preparation sets the terms. The resulting exchange is lopsided by design, and extremely difficult to reverse once positions harden. Most funders understand exactly what their contracts transfer. They prefer the owner not to ask. That preference is visible in the first exchange of documents. Whether courts outside New York apply the same factors with the same weight is a question this article leaves open.

A new analysis starts from the bank record rather than the contract heading, comparing projected and actual receipts, the adjustments requested, and the adjustments granted, and that comparison, which is extremely useful and costs nothing but attention, decides whether the loan defense is viable or whether negotiation should proceed on other grounds. Other states apply their own tests, though that survey exceeds these pages. Return to reconciliation before signing any settlement that recites the contract character as agreed fact.

Bankruptcy Beside Negotiation

Chapter 11 permits reorganization of a business through a court process, and the federal Chapter 11 basics explain that filing generally triggers an automatic stay subject to exceptions, with small business and **Subchapter V** provisions available for qualifying debtors. A private settlement creates no equivalent pause, so negotiation continues while collection does.

The comparison matters most where a creditor refuses, because a holdout with a judgment can undo months of voluntary payments. The guarantor should assume continued exposure without a written release. I have yet to see a stack of advances resolve itself.

Once filed, deadlines run on the court calendar, and every statement the owner makes, even casually, can narrow the options that remain. The petition date matters.

Tax Debts and Personal Exposure

Tax balances follow their own procedure. The IRS offer in compromise guidance describes installment agreements and qualifying compromises rather than automatic discounts, requiring filed returns, current estimated payments, and, for employers, current and prior two quarters of deposits. An open bankruptcy blocks eligibility, an accepted offer demands continuing compliance generally for **five years**, and default can restore the original liability less credits applied.

Employment tax enforcement can reach the individual through the trust fund recovery penalty, which turns on responsibility and willfulness rather than title alone, so delegation to a payroll processor settles nothing by itself. Resist the urge to pay the MCA caller with money withheld for taxes; that substitution exchanges a commercial dispute for a personal one. Payroll tax debt keeps owners awake for good reason. The worry is rational.

Steps disclosed, or withheld, in the first agency conversation shape the account for years. A first conversation with Delancey Street costs nothing and assumes nothing; it is the beginning of a diagnosis, with independent counsel and qualified tax advice handling the legal work. The debits arrive like weather, daily and impersonal, but the response remains a human decision, and the files that face the ledger directly resolve first.