12 Questions That Test an MCA Sales Pitch Against the Agreement

A persuasive pitch can leave the decisive term unexamined, especially when the owner hears a payment amount and assumes the rest of the agreement supports it.

The twelve questions below test a financing proposal. They are editorial questions, not quotations attributed to brokers or a claim that every intermediary conceals the same information. The answer should come from the offer, required disclosures and the contract proposed for signature.

1. What money arrives, and what total is promised?

First, what amount will the business receive after deductions? A headline funding figure may differ from the deposit available for operations. Request the disbursement calculation and identify any amount directed to another obligation.

Second, what total does the agreement require the business to remit? Compare that figure with the usable funds. A payment amount stated without the total can make the proposal appear easier to evaluate than it is.

The California DFPI announcement of commercial financing disclosure requirements identifies metrics intended to improve comparison of covered offers. Coverage and exemptions still require review; the announcement does not make every transaction identical.

Keep the disclosure with the final agreement. If the numbers change before signing, obtain the revised explanation rather than reconstructing the difference afterward.

2. How is the price expressed, and what controls the payment?

Third, does the quoted figure describe a factor, a fee, an annualized measure or something else? The owner should not compare unlike measures as if they represented the same cost.

Fourth, how will money leave the account? Determine the frequency, amount or percentage and the mechanism used. A daily debit and a percentage deducted from actual receipts can create different cash patterns.

A useful comparison places the proposed remittance alongside the business’s receipts cycle. The same total can create a different operational burden when payments are due before customers pay.

Do not let a discussion of approval replace that calculation. Access to funding and the ability to perform the agreement are separate questions.

3. What changes when revenue falls, and what is personally guaranteed?

Fifth, what provision addresses a decline in receipts? Locate the actual reconciliation language, including the request process and required records. The owner needs more than an assurance that payments are flexible.

In LG Funding, LLC v. United Senior Properties of Olathe, LLC, reconciliation was among the factors considered in evaluating whether repayment was absolute. The decision does not establish that every MCA has the same adjustment right.

Ask the intermediary to identify the clause supporting the description given during the sales discussion. If the explanation and wording appear inconsistent, resolve that before signature.

Sixth, what individual obligation is being requested? Read the guaranty and identify its scope, trigger and signer. A reference to unsecured funding does not answer every question about personal liability.

Nor should the owner assume that a guaranty makes every asset collateral. The security agreement and individual undertaking require separate examination. Counsel can explain which obligation the proposed signature creates.

This is where a short sales conversation can conceal a large difference in meaning without proving that anyone intended deception. The remedy is a direct question and a document that supports the answer.

The business should preserve the written explanation it receives. If a material representation influences the decision, it belongs with the file rather than only in the owner’s recollection.

Consider the ordinary slow period rather than an extraordinary disaster. If the company expects fewer receipts during a scheduled closure or seasonal decline, ask how the contract handles that foreseeable change. The response should identify the mechanism, the documents needed and the person who will process the request. A statement that the funder understands the business is not the same as an adjustment provision.

For the guaranty, give counsel the signature page with the surrounding clauses. The scope may depend on definitions elsewhere in the document, and a screenshot of the final paragraph may omit them.

4. What happens on renewal, and what happens on default?

Seventh, does a renewal provide new working capital or use part of the new funding to address an existing balance? Request the amount applied to the old arrangement and the net funds reaching the business.

Compare the new total and payment burden with the existing agreement. A larger nominal advance can provide less usable cash than the owner expects.

Eighth, which events constitute default and what consequences does the contract assert? The answer should address the provisions relevant to the business, including payment interruptions or proposed operational changes.

The owner should not assume that every stated consequence is enforceable, but neither should the language be ignored because the sales discussion focused on approval. Counsel should assess the provision where its effect matters to the decision.

5. Who receives compensation, and which entity is contracting?

Ninth, how is the intermediary paid in connection with the recommendation? Ask whether compensation depends on the provider, amount or completion of the transaction.

The FTC’s guidance on endorsements and material connections explains why relationships affecting credibility can require clear disclosure. That principle does not establish that a particular broker violated a rule; the context and representation matter.

Tenth, who will be the counterparty? The brand communicating with the owner may not be the entity named in the agreement. Identify the funder, servicer and person authorized to answer questions about the account.

A referral can be useful while still carrying a financial incentive. The owner should understand both facts before relying on the recommendation.

6. What documents remain missing, and what happens if you decline?

Eleventh, which documents have not yet been provided? The complete agreement, guaranty and required disclosure should be available for review before the business makes a commitment.

Twelfth, what is the actual consequence of declining or waiting? Distinguish a documented expiration from a general sense that the owner must decide before reading. A funding deadline should not prevent the business from understanding the proposed obligation.

If an existing MCA is the reason new financing feels necessary, consider whether a debt resolution discussion would address the problem more directly. The comparison should include the effect of another payment obligation, not just the deposit it produces.

Delancey Street offers an initial review of MCA settlement possibilities through its business debt settlement service. Its commercial role is distinct from legal representation through independently licensed counsel. Confirm scope and fees before engagement.

The best answer to a sales pitch is a comparison the owner can explain using the agreement. A proposal becomes more useful as the unexplained parts become fewer.