The Payment Hierarchy When You Have an MCA
When cash is tight and you cannot pay everything, you need a clear priority order. Not all debts carry equal consequences. Some trigger immediate severe repercussions. Others give breathing room.
Priority 1: Payroll and Payroll Taxes
Payroll comes first. Always. Missing payroll destroys employee trust, violates wage laws, and payroll tax obligations are non-dischargeable in bankruptcy. The IRS Trust Fund Recovery Penalty under IRC Section 6672 makes you personally liable for 100 percent of unpaid trust fund taxes.
Priority 2: Rent and Essential Utilities
Your business needs a location and power to operate. Landlords can evict. Utility shutoffs halt operations. These are pay-or-close obligations.
Priority 3: Key Vendor Payments
Vendors supplying goods essential to revenue generation. If you are a restaurant, your food supplier is critical. Losing key vendors shuts down revenue.
Priority 4: Secured Debt with Immediate Enforcement Risk
Equipment loans, vehicle financing, and other secured debts where the lender can quickly repossess assets you need.
Where MCAs Fall
MCA payments often feel like they must come first because they are automatically deducted daily. But the automated nature of ACH does not make them the highest priority. When MCA payments threaten your ability to make payroll or keep the lights on, the MCA should be addressed through reconciliation, negotiation, or legal intervention rather than allowed to consume funds needed for survival.
Strategic Approach
Talk to an attorney about managing MCA payments while protecting critical obligations. This may involve reconciliation requests, negotiated modifications, or ACH revocation as part of a broader legal strategy. The goal is keeping your business operational while resolving the MCA on sustainable terms.