Reconciliation (MCA) | MCA Glossary

Definition

A process through which a business requests adjustment of its daily MCA payment to reflect actual revenue performance when sales fall materially below the levels used to set the original holdback.

Explanation

Reconciliation in the MCA context is the contractual mechanism by which the theoretical proportionality of the MCA structure — the idea that payments represent a constant percentage of revenue — can be enforced in practice when ACH-based fixed payments diverge from actual revenue. In a pure card-split arrangement, reconciliation is automatic — the holdback percentage is applied to actual daily card sales, so there is nothing to reconcile. In ACH-based arrangements, where a fixed daily amount is withdrawn regardless of actual revenue, a reconciliation provision allows the business to request a payment adjustment when actual revenue has been materially lower than the projections used to set the fixed ACH amount. Typically, a reconciliation request requires submitting documentation of actual revenue — bank statements and processing records — for the period in question. If the funder agrees that actual revenue was materially below projections, they may reduce the daily ACH withdrawal going forward, apply a credit against future payments, or both. The threshold and process for triggering reconciliation varies significantly by agreement.

Example

A florist's MCA was structured based on $45,000 in monthly revenue, with a daily ACH of $675. A local competitor opened nearby, and actual monthly revenue dropped to $28,000. The florist submits a reconciliation request with 90 days of bank statements. The funder adjusts the daily ACH to $420 to reflect the lower actual revenue.

Why It Matters

A meaningful reconciliation provision is one of the most valuable protections you can negotiate into an MCA agreement. Without it, a fixed daily ACH withdrawal continues regardless of revenue declines, potentially pushing your business into default during a temporary downturn. Before signing, read the reconciliation provision carefully and ask the funder to walk you through the exact process for requesting a reconciliation.

Frequently asked questions

How often can I request a reconciliation?

Reconciliation frequency varies by agreement — some contracts permit monthly reconciliation requests, others limit requests to quarterly or less frequent intervals, and some require a minimum revenue decline threshold (such as 20% or 30% below the baseline) before a reconciliation request can be filed. Read your specific contract provisions carefully and calendar your reconciliation request eligibility dates so you do not miss the window to request an adjustment during a difficult period.