MCA Settlement Offer Letter: Six Terms Worth Addressing

The amount offered is the least decisive term in the letter. What the payment purchases, when the purchase takes effect, and who can deliver it determine whether the dispute ends.

A useful offer proposes an exchange without pretending to be the final agreement. The six terms below are drafting priorities drawn from procedure and practice, not a statutory formula, and counsel should adapt the language where litigation, a disputed guaranty, or questions of formation are present.

Before the owner names a figure, before the broker relays a position, the file should contain the agreements, the ledger, and the authority of the person across the table. Offers built on memory invite acceptance of terms the business never intended.

Parties and Agreements Covered

Begin with the legal name of the business and each agreement the proposal covers, using dates and account references that permit the recipient to identify the transaction without inference. The communicating party may be a servicer, the original advance provider, or an assignee, and those roles are not interchangeable.

Ask who holds authority to accept the proposal and to deliver the contemplated release. A servicer familiar with the account may lack power to settle it, and a settlement that assumes all related entities act as one will not survive the first request for signature. And the owner should confirm that assumption in writing before discussing figures.

An individual guarantor needs separate treatment. State whether the proposal seeks release of that person and identify the obligation at issue, because a letter addressed to the company balance may never communicate the additional request. Where several advances exist, distinguish the agreements inside the proposal from those outside it.

Amount and Schedule the Business Can Perform

The offer should name the total proposed payment, the due date, and any installment structure in plain figures. If funds depend on a specified event, describe the condition with precision or wait until funding is confirmed, since a promise contingent on receipts that never arrive creates a default the business drafted for itself.

Fourteen pages of bank records supported one recent proposal on this desk, and the length proved the point better than argument: the schedule must survive contact with the operating account. Compare proposed dates with expected receipts and the expenses required to keep trading. The business should not offer a payment because it can assemble the first installment, and a counter with a modest opening amount can conceal a final payment without a funding plan.

Request written payment instructions from an authorized recipient and verify them through a known channel before transmitting funds. The definitive agreement should explain how payments are credited and how completion is confirmed.

The Release the Payment Purchases

The New York statute on written releases keeps a written release from failing for lack of consideration or a seal. It does not write the scope of the release for the parties, so the offer must identify the claims and obligations to be resolved, including any guaranty that requires release.

Name what finished means before naming the price of finishing.

Timing decides the value of the words. Does the release operate upon execution, upon receipt of funds, or upon completion of an installment schedule. The proposal should make the trigger visible and explain what remains during performance, including whether the release is mutual and what the business surrenders through its own grant (counsel in these cases tends to ask for the reservation clauses first, having learned that broad opening language often narrows three pages later).

A release can contain reservations that reach the very claim the owner most wants concluded. Read those provisions beside the broad language that precedes them. Ask whether the proposed release is mutual and what the business surrenders through its own grant, since the owner may be asked to relinquish claims beyond the balance in dispute. The offer need not contain a full release drafted without legal review, but it should state the requested result so the recipient cannot mistake the proposal for a payment on account. An owner who has spent months negotiating the amount often has little patience left for drafting, and the remaining language still deserves attention.

Litigation and Financing Statement Action

If a lawsuit is pending, identify it and request the agreed disposition with the person responsible and the point of completion. Under New York rules on voluntary discontinuance, the default character of a discontinuance is without prejudice unless the filing states otherwise, subject to the provisions of the rule, so counsel should ensure the intended result appears in the document that will be filed.

Any financing statement requires a separate instruction. Identify each filing and ask the definitive agreement to address the required termination action and its trigger. The New York statute on termination of financing statements imposes duties under specified conditions, and a proposed settlement does not establish that those conditions have already occurred. If a judgment exists, counsel should address its satisfaction or other agreed treatment, since a letter proposing a discount is not itself a filed satisfaction.

Acceptance and Further Documentation

The recipient should know where to respond and whether the business requests a draft agreement for review. Counsel should assess the effect of any acceptance language before the letter leaves the office. Consider language in this form: the business proposes a stated amount on a stated schedule to resolve identified agreements, including release of named parties, under a definitive agreement addressing trigger, disposition, and filing action.

Performance Details That Decide Success

The final agreement should address payment failure, notice, and any opportunity to cure, with the consequence of a late installment stated beside the release trigger. It should identify charges that remain payable so the negotiated total is the actual total.

Potential tax consequences require separate advice. The federal guidance on canceled debt explains that cancellation may produce income, with exceptions and exclusions subject to requirements. A promised information return does not replace assessment of the transaction, and the owner should keep the executed agreement with payment confirmations and completion documents in a single file.

Delancey Street offers a confidential initial review of MCA settlement possibilities through its commercial settlement service. The company acts as a settlement company, and independent counsel handles legal work. Confirm scope and fees before authorizing a proposal. The opening letter succeeds when the business position is understandable without overstating legal effect.

The value of the letter lies in the agreement it helps the parties reach, followed by the performance that permits both sides to close the file. That sequence, proposal then document then payment then confirmation, is the only template that has ever settled anything.