The Seasonal Business Trap
Seasonal businesses are uniquely vulnerable to MCA problems. Restaurants in tourist areas, landscaping companies, holiday retail shops, and construction firms share the same challenge: revenue fluctuates dramatically through the year. An MCA that seems manageable during peak season becomes crushing during the off season when daily ACH withdrawals consume a disproportionate share of reduced revenue.
MCA funders underwrite based on bank statements that typically reflect peak season numbers. The daily payment is calculated on that peak revenue. When the slow season arrives and revenue drops 40 to 60 percent, the daily withdrawal remains the same or adjusts too slowly.
Reconciliation Is Your First Tool
Most MCA contracts include a reconciliation clause allowing payment adjustments based on revenue changes. Submit a reconciliation request at the beginning of your slow season with bank statements showing the decline. Be specific about the percentage decrease and propose a reduced payment amount. Many funders resist reconciliation because it extends the repayment timeline. But the contractual right exists, and their refusal to honor it may constitute breach.
Payment Strategies for Seasonal Businesses
- Build a reserve during peak season. Set aside a portion of peak revenue specifically to cover MCA payments during slow months.
- Negotiate seasonal terms upfront. Before signing, negotiate a payment structure that accounts for revenue variation. Some funders agree to reduced payments during slow months with acceleration during peak months.
- Avoid stacking during slow season. The temptation to take a second MCA to bridge the off season is overwhelming. A second MCA makes next season worse.
What to Do If Already Struggling
If you are in your slow season with unaffordable MCA payments, act now. Contact an attorney to request reconciliation formally. Review your contract for defenses. Calculate whether the MCA is viable even with reconciliation, or whether settlement is the better path. The worst thing you can do is drain reserves trying to make impossible payments during a period when revenue cannot support them.