How MCA reconciliation works

A merchant cash advance is not supposed to work like a loan with a fixed payment. You sold the funder a percentage of your future sales. If your sales go down, the funder's share is supposed to go down too. Reconciliation is how that happens.

What reconciliation is

When you took the advance, the funder agreed to buy a slice of your future receivables, usually called the specified percentage or holdback. Collecting an exact percentage of every sale every day is hard, so almost every funder instead debits a fixed daily or weekly amount. That amount is an estimate: the holdback percentage times the sales the funder expected you to have.

Reconciliation is the contract's promise to fix that estimate when it is wrong. When your real sales are lower than the estimate, you can ask the funder to recalculate, and the debit should come down to the holdback percentage of what you actually sold.

Why it is in your contract

Many agreements include reconciliation. They are usually written as purchases of future sales rather than loans: the funder buys a share of what you sell, and takes the risk that you sell less. Reconciliation is how that share stays a share when sales drop.

Whether a particular MCA is treated as a sale or a loan is a legal question that depends on the agreement and the state. Our guide Is an MCA a loan? explains what courts have looked at. For this guide, what matters is simpler: if your agreement has a reconciliation clause, you can ask for it to be used.

The math

Say the funder bought 12% of your future sales and set your fixed weekly debit from monthly sales of $200,000. Then business slows and you are doing $150,000 a month.

In this example you are paying $1,384.62 a week more than your agreement allows, about $6,000 a month. With two or three advances at once, the gap multiplies.

To check it you need two things: the holdback percentage from each agreement, and your real deposits for the period. Watch for transfers between your own accounts, loan proceeds and refunds; they are not sales and should not count.

Two kinds of reconciliation

Looking back: a true-up

The funder compares what it debited over a past period (often the last month) with the holdback percentage of your actual sales in that period. If it took too much, the contract usually says the difference is credited or refunded.

Looking forward: an adjustment

The funder changes the daily or weekly debit going forward to match your current sales. Some contracts call this an adjustment and keep "reconciliation" for the look-back. Many contracts have both.

Read for the details that decide whether you can actually use it: how often you can ask (often once a month), the window to ask in, which documents you must send (bank statements, processor statements, sometimes every business account), where to send the request, and how many days the funder has to answer.

How to ask for it

1. Find the clause. Search the agreement for "reconciliation", "adjustment", "specified percentage" and "true-up".
2. Gather the period's bank statements for every account the agreement covers.
3. Do the math per funder: holdback percentage times real sales, compared with what was debited.
4. Send the request in writing to the notice address and by the method the contract names (email, mail, a portal). Keep proof you sent it and when.
5. Keep paying while you wait, unless a lawyer tells you otherwise. Stopping on your own can be called a default.
6. Follow up when the response deadline passes, in writing, and keep every reply.

Red flags

• The clause gives the funder "sole discretion" to refuse, or makes the request window impossibly short.
• The funder asks for documents the contract does not require, or never answers.
• Debits continue at the old amount after an approved adjustment.
• You are offered a "modification" that adds fees or extends the term instead of the reconciliation the contract promises.

Education only, not legal advice. Agreements differ; your contract's exact wording controls.