How to actually get a forbearance on your MCA (and what to do when the funder says no)

Before you pick up the phone

The word “forbearance” is almost certainly not in your MCA contract. I’ve read a lot of them. When you call your funder and use that word, the rep hears one thing: this person hasn’t read their paperwork. That’s the moment the conversation shifts against you.

Your contract probably says “reconciliation.” Maybe “good faith review” or “modification of remittance.” They describe different processes with different leverage and different outcomes.

The four words that matter before you dial: reconciliation, modification, pause, workout. Each lands differently with the rep. The next section explains which is which; if you need the phone script right now, it lives in Section 3.

First, get five things in front of you:

1. Your signed contract, printed, with the reconciliation clause flagged.
2. The last 90 days of bank statements.
3. A current AR aging report.
4. A year-to-date P&L.
5. Those four asks written across the top of the page so you don’t blank under pressure: reconciliation, modification, pause, workout.

Item five is the move. The funder’s worst case is $0 recovery, and you knowing that runs the rest of this article.

The word is costing you money

The contract uses its own words, and knowing them is the gap between a callback that leads somewhere and one that never comes.

Here is what each of the four actually asks the funder to do:

• Reconciliation. A true-up that lowers your daily remit because real receivables came in below the projection used at origination. Documented, contractual, and routine when you bring the paper.
• Modification. Lower daily, longer term, roughly the same total balance. This is the funder’s most common yes when a single MCA is starting to choke a business that still pencils out.
• Pause. A short debit hold. One to four weeks, sometimes informal, with a stated return date and a reason on file.
• Workout. Post-default settlement at a discount. Real outcome, but only after the account has already broken, and priced as such.

But a true forbearance, meaning a documented stop with no penalty accrual and no extension fee, almost never happens in this corner of finance. That is not an accident of vocabulary. The whole product is engineered around the daily debit being uninterruptible. So when the rep says “we don’t do forbearances,” they are technically correct, and they are also banking on you walking away instead of asking for one of the four things you actually qualify for.

Honest odds before you dial. Reconciliation goes through often when ninety days of bank statements back it up. Modification goes through, though less reliably. A pause, when you get one, is short and conditional. Settlement is its own conversation, lives at the back of the piece, and you only get to that table after default.

The funder’s worst case is zero recovery. The workout desk knows it. The in-house counsel knows it. You knowing they know it is the entire negotiation. The next section is the three sentences that get you to the people who price that math.

Read this before you call

Three sentences get you off the collections script and over to the workout desk. Use them in this order, no improvising, no warmup. The rep is reading from a script that assumes you haven’t. Yours sounds like you have.

“This is [your name], owner of [legal entity], contract dated [origination date], current balance approximately [number]. I’m calling to request a reconciliation under the agreement, not a forbearance. Please transfer me to the reconciliation desk or to a workout specialist with authority to review documentation.”

That’s it. No backstory about the slow quarter, no apology for the missed debit last week, no question about whether reconciliation is something they offer. You are invoking a clause that already sits in the contract you both signed. The front-line rep is not the person who can act on it. The only goal of the opening line is to get transferred.

When the rep pushes back, the answers are short, calm and the same every time.

If the rep says “we don’t do forbearances,” you say: “Understood. I’m requesting a reconciliation, which is a different process. The clause is in section [X] of my agreement. Please transfer me.”

If the rep says “you need to bring the account current first,” you say: “I cannot bring the account current at the contracted remittance level. That’s the trigger for the clause. I’m not stopping debits unilaterally.”

If the rep says “let me offer you a two-week deferral,” you say: “A deferral doesn’t address the receivables drop. I’m requesting a documented reconciliation review. Who handles those, and what do they need from me?”

If the rep says “we’ll need to escalate, someone will call you back,” you say: “I’d like a name and a direct extension before we end the call, and a written confirmation of the request to the email on file today.”

Two more things before you dial. Check whether your state is one-party consent on call recording. If it is, record. Either way, write down the rep’s name, extension, the time you called and one sentence of what they said. The actual reconciliation paperwork goes by email or fax later. The phone call’s only job is to get a name and a route.

Tone is flat. Slow. No apology, no anger, no jokes. The rep is paid to get you to a higher payment. You are on the call to get to a different desk.

Reconciliation is a right, not a favor

So.

You’re past the gatekeeper. The request that lands is the one in writing, not the one you make on the call.

Reconciliation is a contractual right. The clause sits in almost every properly drafted MCA, and a Davis & Cantor practitioner note describes it as the right to a true-up when actual receivables fall below the origination projection. You are not asking for grace. You are exercising language you already paid for.

Open the signed PDF. Search “reconciliation,” “true-up,” or “good faith review.” Mark the section number with a pen. That number goes at the top of every email and cover letter you send today.

Three documents go in the package:

• 90 days of bank statements
• Current AR aging
• Most recent P&L

Bundle them into one PDF with a short cover letter that names the contract by date and balance, cites the clause by section number, and states the ask in one sentence: a reduced daily debit of $X until receivables recover.

Send it in writing. The phone gets the rep paid. The paper builds a record. If the funder slow-walks the clause and you end up filing a counterclaim under your state’s commercial disclosure law later, your dated request is the exhibit. A friendly phone call is not.

Funder patterns vary. Kapitus tends to move faster on documented written requests than the smaller shops. Reliant tends to respond quickly when the receivables drop is right there on the page. Patterns, not promises. The sentence that wins is the one in your contract, not the one a rep says on the first call.

Modification, pause, or settlement?

Reconciliation buys you a window. It does not pick the ask that goes in the window. That is the next move, and you only get to make it once before the rep stops treating you like a person with options.

Three facts pick it for you. How many advances are stacked on you. Whether revenue dipped or is still dropping. Whether the math pencils at any daily debit you could realistically pay.

One MCA, revenue dipped but the business still works at a smaller daily? You want a modification. Lower remit, longer term, total payback close to the same number. It is the funder’s most common yes.

Revenue coming back inside 30 to 60 days and you can prove it on paper (a contract closing next month, a seasonal turn, a delayed AR batch with a customer name on it)? Ask for a pause. One to four weeks of held debits, return date in writing.

Two or more advances stacked, and even at a forty percent lower debit your account still goes negative on the model? You are in settlement territory whether you say it out loud yet or not, and you are going to default on at least one of them. Section 7 is the timeline of that default. Section 8 is the price.

Look, the same packet you built for the reconciliation request does the rest, pointed at the new outcome. One statute name dropped at the right moment is what separates a modification you can live with from the funder’s first offer.

What changed in the law (and why your funder knows it)

The bank statements and the AR aging are half your leverage. The other half is four legal shifts between 2019 and 2024 that changed the funder’s math more than they changed yours. You don’t have to memorize the statutes. You have to be able to drop one of them into a sentence on the call. The rep has heard them all before, and the workout desk has a binder on each.

NY S6395, signed August 30, 2019. In eight words: out-of-state borrowers cannot be sued by COJ in NY. The bill amended CPLR §3218 so a confession of judgment can only be filed against someone who lives, works, or owns property in New York. Before that, about 99% of small-business COJs landed in NY courts because NY entered them fastest. No NY nexus, contract signed after 2019, the COJ threat is mostly air. A pre-2019 COJ already on file is a different problem, and Section 9 tells you when to stop reading and call counsel.

FTC v. RCG Advances and Jonathan Braun. The feds permanently banned two of the loudest operators in the business. RCG Advances and owner Robert Giardina settled in June 2022 for $2.7 million in restitution and a lifetime industry ban. In February 2024 a federal court entered a $20.3 million judgment against Jonathan Braun and banned him from MCA and debt collection for life. The FTC’s own blog headline used the word “bilking.” Borrow it.

NY CFDL, effective August 1, 2023. Plain version: NY funders must disclose APR on commercial financing under $2.5M. The final regulations from NY DFS in February 2023 require an annualized rate, the finance charge, broker compensation, and total cost. The industry did not have to disclose any of that before. Most originations on operators’ desks today predate August 2023. Some after it are deficient. A missing or wrong disclosure is a legal claim, and a chip you bring to the settlement table.

CA SB 1235, effective December 9, 2022. Same idea, smaller box. California requires similar disclosure on sales-based financing up to $500K when the business is run from California. Virginia and Utah followed in early 2023, Georgia in July 2024, all pointing in the APR-equivalent direction.

One number for the back pocket. The NY AG’s Yellowstone Capital settlement cancelled nearly $1 billion in debt tied to improperly obtained COJs. Funders are not invincible, and they know it. What actually happens when the debits stop is a sequence with specific moves at each step, not the single catastrophe most people imagine.

This is going to suck. What actually happens if you stop paying.

It does not suck on a single day, and the operators who panic and walk away from the debit cold lose because they think it does. Default is a sequence, not a switch, and knowing the sequence buys you decisions you didn’t think you had.

Day 1, the ACH bounces. Your bank may charge an NSF, the funder logs a missed remit, and nothing legal has happened yet.

Day 3 to 5, a default letter lands by email and certified mail. Read it the hour it arrives. The cure language is in there, and the date on the letter starts the clock for everything that follows.

Day 30 to 60 is the loud one. The funder fires UCC notifications at your merchant processor and at named customers in your AR. Your processor may freeze deposits or redirect them. Clients call you to ask why they got a letter from a company they have never heard of telling them to pay someone else. Most operators do not see that piece coming, and it is the moment that pushes them off the workout track and into doing nothing.

Day 60 to 90, a lawsuit gets filed, usually in a New York county court for a NY-based funder. Add 30 to 60 more days for a default judgment if you do not answer. If a pre-2019 confession of judgment is already on file, or you have a NY nexus, judgment can enter in days instead of months.

Hard line. Do not stop the debits unilaterally without understanding this cascade. Pulling the plug with no written reconciliation request on file and no workout offer to point at makes you look exactly like the borrower funders sue first.

What is mostly out of reach for the funder: homestead in most states, certain retirement accounts, and receivables not identified in the UCC. What gets grabbed: the bank accounts at the institution named in the UCC, and the AR that was identified.

You still have moves at every step. An answered complaint stops the default judgment. A workout offer faxed the morning the default letter lands is the call most funders have been quietly hoping for. What that workout costs is the next section.

Settlement at 40 to 70 cents on the dollar

If the default letter lands and you fax a workout offer back that morning, the next question is the number on it. Real settlements on a defaulted MCA close between 40 and 70 cents on the dollar. Where you land is not feel. It is two inputs: how much cash you can wire today, and how much credible legal pressure sits next to the offer.

The 40-cent floor shows up with documented hardship and at least one real defense. A deficient APR-equivalent disclosure on a post-2023 NY origination, or a post-2022 California one. A confession of judgment filed against you outside any state you live, work, or own property in. Origination paperwork the broker fudged. Section 6 is where those statutes live; this is where they price.

The 70-cent ceiling shows up when the funder still believes most of the balance is collectible and you are asking to pay it down over six to twelve months. Lump sum almost always beats a payment plan on price. If you can scrape a smaller wire together, scrape.

Two lines have to be on the term sheet before you sign. UCC-1 release language, in writing, with a date the filing comes off. A satisfaction of judgment if a judgment was entered. Without both, you wired a number and kept every problem.

And any outfit charging 15 to 30 percent of your balance upfront to negotiate this for you is selling something the contract already lets you do. Pay a lawyer for the situations the next section describes instead.

Stop. Call a lawyer when you see this.

Settlement you can run yourself. Some situations you cannot. Four facts turn this from a negotiation into a legal problem, and the moment any one of them shows up, the DIY work stops and you pay for an hour with an MCA defense attorney.

A confession of judgment filed in New York when you do not live, work, or own property there. Origination paperwork that is not what you signed: a guarantee or signature that is not yours, or a funded amount that does not match the agreement. Anyone on the funder’s side bringing up criminal charges, the police, or your family. ACH pulls running at amounts, frequency, or routing that the contract does not authorize.

Honestly, $300 to $2,000 for a one-shot consult. Names by reputation only, not endorsement: Berkovitch & Bouskila, Lane & Lane, Tayne. Ask specifically about MCA defense work, and bring the contract. If counsel reads it and the math no longer pencils at any modification or settlement, the next section is where that conversation lives.

Bankruptcy is a tool, and here is your tomorrow morning

Subchapter V is a fast-track Chapter 11 reorganization built for small businesses. It keeps you operating, runs in months rather than years, and costs a fraction of standard Chapter 11. Chapter 7 is what most people mean when they say “bankruptcy,” and Chapter 7 ends the entity. Sub V does not.

There is a debt cap on Sub V eligibility. The original SBRA number was around $2.7M, the pandemic-era statute pushed it to $7.5M, and Congress has let it expire and re-raised it more than once. The number you read on a 2022 blog post may not be the number today. Confirm the current cap with the lawyer you call, not with this article.

When Sub V actually pencils out: two or three or four advances stacked on you, the modified-debit math from earlier still goes negative at any debit you could realistically pay, a UCC blast already in motion, and a confession of judgment threatened or filed. One MCA almost never gets you here. Three sometimes does. Filing is not a verdict on you as an operator. It is a question of whether the entity continues to exist at all, and that is a math question.

That decision is for next week, with a lawyer, with the contracts in front of both of you. Tomorrow morning is simpler, and it is the same move whether or not you ever file.

Send the packet today. Fax if the contract lists a number, certified mail and email to the cover-page address if it does not. Date the cover letter. Write the reconciliation clause section number at the top of it. Do that before you close this tab.

Funders settle the majority of workout files that arrive with documentation behind them. The ones that do not mostly go sideways because the borrower went quiet, not because every offer got refused. You may not close at forty cents without legal pressure in the room. You will almost certainly get a callback from someone with authority to move the number, and that callback only happens with a dated packet already on file.