Top Companies to Challenge Unreconciled MCA Contracts — 2026

Challenging an MCA contract on reconciliation grounds requires a firm that understands both the contractual mechanics of MCA agreements and the case law courts use to reclassify MCAs as loans. The firms below are ranked by one thing: their expertise in reconciliation-based MCA defense.

What Reconciliation Means and Why It Matters

Reconciliation is the single most important concept in MCA law. It is the thing that determines whether your merchant cash advance is a legitimate purchase of future receivables — exempt from usury laws — or a disguised loan subject to interest rate caps that make the entire contract void. Here is how it works.

The legal theory. A merchant cash advance is structured as a purchase agreement — the funder “buys” a portion of your future receivables at a discount. Because it is a purchase and not a loan, usury laws do not apply. But for that classification to hold, the funder must bear genuine risk tied to your business’s performance. If your revenue drops, the funder’s return must drop too. The mechanism for that risk-sharing is reconciliation — periodic adjustment of daily payments based on actual revenue.

The contract language. Nearly every MCA contract includes a reconciliation provision. It typically says you can request reconciliation at specified intervals — monthly, quarterly — by providing bank statements, and the funder will adjust the daily payment to reflect actual revenue. This language is essential to the funder’s legal position that the MCA is not a loan. Without it, the whole structure falls apart.

The reality. In practice, the vast majority of MCA funders never reconcile. Not once. They set a fixed daily payment at origination — based on projected revenue at the time of funding — and collect that exact amount every single day regardless of what happens to your revenue. Revenue drops 50%? Same daily payment. Revenue drops 80%? Same daily payment. The reconciliation provision is window dressing — and that is your opening.

How Courts Decide: The Reclassification Test

When a business owner argues that an MCA should be reclassified as a loan, courts apply a multi-factor test. The absence of genuine reconciliation is the most important factor — but courts look at other elements too:

1. Fixed vs. Variable Payments. Did the funder collect the same amount every day regardless of revenue? Bank statements showing identical daily ACH withdrawals over months of declining revenue are the most persuasive evidence a court will ever see. This is the core of the reconciliation analysis — and it is usually an open-and-shut case.

2. Reconciliation Requests Ignored. Did you ever request reconciliation, and did the funder ignore or deny it? Written reconciliation demands that went unanswered are powerful evidence. Even if you never requested reconciliation, the funder’s failure to ever initiate the process on its own — despite having full access to your bank account data via ACH — is relevant and damning.

3. Guaranteed Return. Does the contract guarantee the funder a specific return regardless of how your business performs? If the funder is guaranteed to receive 1.4x its advance amount no matter what happens, there is no genuine risk. And without risk, there is no legitimate purchase of receivables. The funder is simply lending money at a fixed interest rate disguised as a factor rate. Period.

4. Personal Guarantees and Confessions of Judgment. Does the contract include a personal guarantee and a confession of judgment? These provisions shift all risk away from the funder and onto you — further destroying the classification as a purchase agreement. If the funder can seize your personal assets and obtain judgments without notice, the funder bears zero risk. That is a loan.

5. Effective APR Calculation. Courts calculate the effective APR by treating the factor rate as interest and dividing by the term. A $50,000 advance at a 1.4 factor rate repaid over 6 months has an effective APR of approximately 160%. Under NY Gen. Oblig. Law §5-501, the civil usury cap is 16% and the criminal usury cap is 25% under Penal Law §190.40. Once the MCA is reclassified as a loan, those caps apply — and the contract is void.

Step-by-Step: How to Challenge Your Unreconciled MCA

Here is exactly how the challenge process works when your MCA was never reconciled:

Step 1: Gather Your Evidence. Collect the MCA contract — focus on the reconciliation provision — six months of bank statements showing identical daily ACH withdrawals, your business financial records showing revenue changes, and any correspondence with the funder. Your attorney needs all of it to build the case.

Step 2: Send a Formal Reconciliation Demand. Your attorney sends a written demand to the MCA funder citing the reconciliation provision in the contract and providing evidence of revenue decline. The demand requests immediate reduction of daily payments to match actual revenue. This creates a paper trail — and if the funder refuses or ignores the demand, that refusal becomes evidence against them.

Step 3: Build the Reclassification Case. If the funder refuses to reconcile — and they almost always do — your attorney prepares the legal argument for reclassification. This includes calculating the effective APR, documenting the absence of reconciliation, analyzing the contract for additional loan-like features like personal guarantees, COJs, and guaranteed returns, and researching applicable case law.

Step 4: Use the Defense as Use in Negotiations. The reclassification argument is extraordinarily powerful use. MCA funders know that if a court reclassifies their product as a usurious loan, the contract is void and they lose everything. Rather than risk that outcome, most funders will negotiate a settlement at 30–60% of the outstanding balance. This is how Delancey Street resolves the majority of reconciliation cases. It works.

Step 5: Litigate if Necessary. If the funder refuses to settle, your attorney files a declaratory judgment action or asserts the usury defense in response to the funder’s collection lawsuit. Courts in New York and other jurisdictions have increasingly sided with borrowers on this issue, and the CFPB has signaled interest in MCA regulatory oversight as well.

Common Funder Defenses and How to Beat Them

When challenged on reconciliation, MCA funders fight back. Here is what they will throw at you — and how your attorney shuts it down:

“The borrower never requested reconciliation.” This is their favorite defense. Many contracts require the borrower to initiate reconciliation, and funders argue that if you never asked, they had no obligation to do it. The counter is threefold: (a) some contracts impose reconciliation obligations on the funder regardless of borrower requests; (b) even when borrower-initiated, the funder’s failure to inform you of your reconciliation rights is a deceptive practice; and (c) courts have found that a reconciliation provision that is never exercised is illusory — regardless of who should have initiated it.

“The contract is governed by out-of-state law.” Some MCA contracts include choice-of-law provisions selecting a state with no usury cap — Utah, Delaware, you name it. The counter: New York courts have refused to enforce these choice-of-law provisions when the MCA was funded to a New York business or the COJ was filed in New York. The usury statute is considered strong public policy that overrides contractual choice of law. The funder does not get to pick the rules.

“The MCA is a purchase agreement, not a loan.” Every funder says this. Every single one. The counter: the label on the contract does not determine its legal nature. Courts look at the substance of the transaction, not the form. If the funder collected fixed daily payments with no genuine reconciliation, the substance is a loan — regardless of what the contract calls it. The doctrine of unconscionability further supports reclassification when the terms are completely one-sided.

Top Companies for MCA Reconciliation Challenges — 2026

Here are the three top-rated firms for challenging MCA contracts that were never reconciled. Only one — Delancey Street — actually handles reconciliation demands, usury reclassification arguments, and MCA settlement negotiations.