How Tariffs Affect MCA Borrowers
Tariffs increase the cost of imported goods. For businesses relying on imported inventory, raw materials, or components, tariffs directly reduce profit margins. When margins shrink, MCA payment ability decreases. This creates a compounding problem: the business took an MCA based on pre-tariff projections that are no longer achievable.
Industries Most Affected
Businesses most vulnerable to tariff-related MCA stress include restaurants importing specialty ingredients, retail stores sourcing overseas products, construction companies relying on imported steel and lumber, manufacturing businesses using imported components, and auto repair shops depending on imported parts. If your business is in these categories with an active MCA, tariff impacts on margins may make payments unsustainable.
Legal Implications
Tariff-related revenue declines may strengthen your legal position. If your contract includes a reconciliation clause, documented revenue decline due to tariffs is a legitimate basis for requesting payment reduction. If the decline is severe enough, it supports settlement arguments. In some cases, a material adverse change in business conditions may affect enforceability of certain provisions.
What to Do Right Now
If tariffs are affecting your business and you have an MCA:
- Document the tariff impact with specific numbers showing increased costs and decreased margins.
- Submit a formal reconciliation request citing the revenue change.
- Evaluate whether the MCA is sustainable at any payment level or whether settlement is better.
- Consult with an attorney who can use the tariff impact as leverage in negotiations.
Do not wait until you default. The time to act is when you can see the problem coming.