MCA reconciliation is the process of comparing what your funder actually collected against the agreed percentage of your actual sales over a period, then adjusting. If fixed payments took more than the agreed share because revenue fell, the payment can be reduced going forward, and some agreements also credit the difference. You request it, send recent bank statements, and the funder reviews them. The purchased amount itself doesn't change.
What is MCA reconciliation?
When you take a merchant cash advance, you sell a percentage of your future receivables: the specified percentage, also called the holdback or split. For convenience, that percentage is turned into a fixed daily or weekly ACH debit based on your typical revenue. (Our guide to how MCA payments work shows how that estimate is made.)
A fixed debit is only an approximation of a percentage. In a strong month it may take less than the agreed share; in a weak month it may take more. Reconciliation is the check that squares the two: the funder looks at what you really brought in, applies the agreed percentage, and compares the result with what was debited.
The exact procedure, including how often you can request it, what period it covers and how adjustments are applied, is set out in your agreement. Agreements use different names for it, such as reconciliation or adjustment, so look for the section that describes how payments relate to your receivables.
Why reconciliation exists
A bank loan has a fixed payment you owe regardless of how business is going. A merchant cash advance is different: what you sold is a share of sales that may or may not materialize. Reconciliation is the mechanism that keeps the payments connected to that share. It's one of the features that distinguishes an advance from a fixed loan payment, and one of the more practical protections in an MCA agreement, so it's worth understanding before you sign.
When should you request a reconciliation?
Reconciliation is meant for a real, sustained drop in revenue, not a single slow day. Situations where it commonly makes sense:
- A seasonal low that's deeper than usual, for example a landscaping or HVAC business in a slow stretch that's running well below the months the advance was underwritten on.
- A lost customer or contract that took a meaningful slice of monthly revenue with it.
- A temporary disruption, such as a location closed for repairs, a key piece of equipment down, or a road closure that cut foot traffic.
- Slower collections, where customers are paying later than usual and deposits have dropped as a result.
If one week was soft and the next one recovered, the fixed payment has probably balanced out on its own. Reconciliation is for when the gap persists.
What documents will you need to send?
The funder needs to see what your business actually took in. Expect to send:
- Complete bank statements for the period in question, usually your most recent month or months, plus month-to-date activity.
- Statements for every business account that receives revenue, not only the one the debits come from.
- Where relevant, card processing statements showing your sales volume.
- A short explanation of what changed and whether you expect it to recover.
Send full statements as issued by your bank, every page. A partial picture slows the review and makes it harder to adjust, because the funder can't confirm your revenue really fell rather than moved to another account.
How MCA payment adjustments work
- You make the request in the way your agreement describes, and send the documents.
- The funder calculates your actual receivables for the period from the statements, excluding transfers between your own accounts and proceeds of other financing.
- The agreed percentage is applied to those receivables and compared with what was debited.
- An adjustment is made as the agreement provides. Commonly that's a lower payment going forward that reflects current revenue; some agreements also credit or refund amounts collected above the agreed share.
Hypothetical example. An advance was underwritten on $200,000 a month in revenue at a 10% specified percentage, so payments were set at about $20,000 a month. Revenue then falls to $120,000 for a month. The agreed share of that month's sales is $12,000, so the fixed payments collected about $8,000 more than the agreed percentage. A reconciliation could bring payments down toward $12,000 a month while revenue stays at that level. Illustration only; your agreement sets the actual method.
Keep in mind that the purchased amount does not change. Your hard stop number is fixed. Lower payments mean the advance takes longer to deliver, but there's no extra cost for that. When revenue recovers, payments can return to the original level.
Why talking to your funder early matters
The worst time to raise a cash-flow problem is after several debits have bounced. Returned payments can bring bank fees and any returned-payment fee in your agreement, and repeated returns or blocking the debit are commonly treated as a breach. Once that happens, the conversation is about a default instead of an adjustment.
Calling early changes that. A funder who hears from you when you first see the slowdown, with statements in hand, can review the numbers before anything goes wrong. InstaFunders' merchants can call us at 844-828-7986 or email admin@instafunders.com.
Reconciliation vs. other options
- Reconciliation follows the procedure in your agreement and is based on your actual receivables.
- A negotiated payment change may be possible in other situations; any change should be confirmed in writing.
- A renewal is new funding, usually for a business that's performing well. It isn't a fix for falling revenue, and adding funding when sales are dropping can make things harder.
If you're shopping for an advance, ask how reconciliation works before you sign. It belongs on the same checklist as the factor rate; see how to read an MCA offer, and check the requirements before you apply.
Frequently asked questions
What is reconciliation on a merchant cash advance?
It's a review that compares the payments a funder collected with the agreed percentage of your actual sales over a period. If fixed payments took more than the agreed share because revenue fell, the payment can be adjusted, as your agreement provides. The purchased amount stays the same.
How do I request an MCA reconciliation?
Contact your funder, follow the procedure in your agreement, and send complete recent bank statements for every business account, plus month-to-date activity and a short explanation of what changed. The funder calculates your actual receivables and compares them with what was collected.
Does reconciliation reduce what I owe in total?
No. Reconciliation changes the pace of payments, not the purchased amount. Lower payments mean the advance takes longer to deliver. Because the cost is fixed by the factor rate at signing, a longer delivery period doesn't add cost.
Will asking for a reconciliation hurt me?
Asking for an adjustment your agreement provides for, with documents that show a genuine drop in revenue, is the responsible thing to do. It's far better than letting debits bounce, which can lead to fees and a default under many agreements.
Can payments go back up after a reconciliation?
Yes. Reconciliation reflects actual receivables, so when revenue recovers, payments can return toward the original amount. That keeps delivery tied to the agreed percentage of your sales in both directions.