The Dilemma
You want the daily ACH withdrawals to stop because they are draining your business, but you do not want to trigger a default resulting in lawsuits, bank freezes, and personal guarantee enforcement. This is one of the most common situations we encounter, and there are legitimate strategies to address it.
Request Formal Reconciliation
Your first and best option. Most MCA contracts include a provision allowing payment adjustment when revenue decreases. Submit a written request with current bank statements showing the decline. Propose a specific reduced amount your business can sustain. The funder is contractually obligated to consider reconciliation. If they refuse, that refusal strengthens your legal position if the situation escalates.
Negotiate Modified Terms
If reconciliation does not provide adequate relief, engage an attorney to negotiate directly. Modified terms can include reduced daily amounts, a switch from daily to weekly payments, a temporary payment holiday, or a restructured payoff. These negotiations are more effective with legal representation because the funder knows an attorney will escalate if reasonable modifications are refused.
ACH Revocation Rights
Under NACHA rules and the Electronic Fund Transfer Act, you have the right to revoke ACH authorization. However, doing so without a legal strategy effectively triggers default. Revocation should only be part of a coordinated plan where your attorney has already established a framework for modified payments or is actively negotiating.
What to Avoid
- Do not simply close your bank account. This triggers default and looks like evasion.
- Do not take another MCA to cover payments on the first. This is stacking.
- Do not ignore the funder’s communications. Engagement through your attorney demonstrates good faith.