Common Questions

What Is a Reconciliation Clause in an MCA Agreement?

A merchant cash advance is written as the purchase of a share of future receipts, not as a fixed loan payment. Because receipts move, most agreements include a reconciliation clause that allows the withdrawal to be recalculated against actual revenue. Many owners never use it because they do not know it is there. Every business situation is different.

What the clause usually says

• A stated percentage of receipts the funder is entitled to collect
• A fixed estimated daily or weekly withdrawal based on earlier revenue
• A right to request an adjustment when actual receipts differ from that estimate
• A deadline and a required method for making the request, often in writing
• The records the funder can require, such as bank and processing statements

How a reconciliation request typically works

• Identify the review period described in your agreement
• Pull bank statements and processor reports covering that period
• Compare actual receipts with the receipts assumed when the advance was arranged
• Submit the request in the format and within the window the contract requires
• Keep written confirmation of anything the funder agrees to

Reconciliation is not the same as restructuring, which changes the terms themselves, or settlement, which resolves the balance for an agreed amount. It is the mechanism already inside most agreements for matching payments to real revenue.

What to check in your own contract

• Whether reconciliation is described as mandatory or discretionary
• The specified percentage of receipts
• The request deadline and where notices must be sent
• Any fee tied to a request or to a returned payment
• Definitions for receipts, which may exclude certain deposits

Unfamiliar terms in that section are covered in the MCA glossary, and the factor rate calculator can help you see what the total cost of the advance looks like over time.

How Merchant Program Solutions fits in

Merchant Program Solutions is a marketing and referral company. We are not a lender, law firm, or financial advisor, and we do not provide legal, tax, accounting, or financial advice. We collect basic information about your situation and, where appropriate, refer it to independent service providers who are responsible for their own services, fees, terms, and requirements. No outcome, approval, or result is promised.

This page is general information only and is not legal, tax, accounting, or financial advice. Every business situation is different.