Contractors With Stacked MCAs: 7 Reviews Before the Next Progress Payment

The next progress payment may already carry obligations that an MCA proposal overlooks. A contractor should identify the work it pays for and the claims attached to it before treating the deposit as available money for a settlement.

1. Match the Payment to the Project Documents

Retrieve the contract, approved payment application and the correspondence establishing what the customer has accepted. Distinguish the amount requested from the amount approved, then identify deductions or conditions still under discussion.

A payment application can include work performed, stored materials and sums subject to further approval. The contractor needs the actual calculation rather than the figure entered into a general cash forecast.

Keep change orders separate until their status is known. An owner who expects a disputed extra to fund next week's debt payment is making a different proposal from one based on an approved receivable.

The accounting record should show the project involved and the commitments associated with the receipt. A deposit arriving in the same bank account as other revenue does not answer who may have rights in the funds.

2. Identify Restrictions and Competing Claims Before Allocation

Ask construction counsel to examine applicable law and the project agreements before directing money away from project obligations. Payment restrictions, trust requirements or other claims may require jurisdiction-specific analysis.

Do not assume every construction receipt is unrestricted cash. Nor should a contractor infer a particular trust rule from the fact that another state's projects receive different treatment.

List unpaid subcontractors, material suppliers and the work remaining before completion. That information matters to legal review and to the practical cost of finishing the job.

Before promising the progress payment to a funder, before using a transfer between accounts as the proposed solution, obtain advice on the rights attached to that payment. Account movement does not resolve those rights.

The most insistent demand may be the least informative document in the file. An allocation decision requires the governing obligations, rather than a comparison of which creditor called first.

3. Review the Entire MCA Stack With Delancey Street

Delancey Street offers a free confidential initial review of MCA concerns. A contractor can present each advance and a project schedule showing the receipts expected after the costs of continued performance.

The company provides debt settlement services and coordinates legal matters with independent counsel. It is not a law firm. Construction payment rights, litigation and collateral disputes require the appropriate legal engagement.

Ask the adviser to ensure that the proposed budget includes every active draw. Negotiating a smaller payment with one funder may leave the business unable to complete a project because another withdrawal remains unchanged.

Counsel should ensure that proposed terms respect restrictions identified in the project review. Settlement capacity should not be calculated from funds the contractor cannot lawfully devote to that purpose.

Review the service fees and who communicates with each claimant. The initial consultation should define the work before the contractor assumes that one engagement covers every dispute.

4. Examine Security Interests and Reconciliation Together

New York UCC Section 9-315 addresses continuation of security interests in collateral and identifiable proceeds, subject to authorization and exceptions. It illustrates why receipt of cash does not end the inquiry into an existing collateral claim.

Examine the actual security grants and applicable law. A financing statement alone should not establish that every project payment is covered or that the filing party prevails over all competing interests.

Compare the Contractual Definitions of Revenue

For each advance, identify the receipts included in the calculation and any procedure for reconciliation. Agreements signed at different times may not use identical definitions or submission requirements.

In LG Funding LLC v. United Senior Properties of Olathe LLC, the New York appellate court considered reconciliation alongside other features bearing on absolute repayment. The decision supplies a legal framework, not a universal cancellation right for contractors.

Preserve adjustment requests and the funder's response. A request based on reduced receipts should include the records required by the agreement and distinguish revenue decline from an unresolved customer dispute.

The interaction may remain uncertain until counsel reviews the documents. One should not force a clean answer from provisions that describe different obligations.

Read the Effect of a Proposed Amendment

An amendment may change payment amounts while preserving other terms. Identify any additional security, acknowledgment or personal undertaking before accepting the revised schedule.

Ask whether the arrangement applies to every contract held by that funder or only the account named. A contractor should not infer a release of another advance from a proposal that mentions only one balance.

Resist the urge to sign on the strength of a reduced daily figure. The business needs to review and analyze the conditions that make the reduction available and the consequences if it misses an installment.

The stack should be examined as a set of documents whose effects overlap. A single spreadsheet cell labeled MCA debt cannot establish those effects.

5. Preserve the Contractor's Own Collection Rights

A dispute with a funder should not consume the time needed to preserve a claim against a project customer. Ask construction counsel to identify the applicable notice and filing requirements.

New York Lien Law Section 10 uses different filing periods and triggers for general work, qualifying single family improvements and retainage. Its definitions and exceptions matter; another state's deadlines may differ.

Keep the last work date and relevant payment terms with the project record. An extremely promising collection claim can lose value if the required procedure is overlooked.

Separate retainage from an ordinary overdue invoice in the forecast. The customer may identify a different release condition or due date, and counsel needs that language to assess the available remedy. A settlement timetable should reflect when the contractor can expect payment under the actual arrangement, including any unresolved completion requirements. The amount shown on the job ledger is only the starting figure.

6. Keep the Payment Record Complete

Retain bank statements and the creditor ledgers. Record accepted changes alongside the agreement they modify.

Simply identify discrepancies for review. Do not alter the account of what was received or paid to make a proposed settlement easier to explain.

7. Offer Only What the Project Can Support

A settlement should account for the cost of completing the work that produces future receipts. Identify uncertain change orders and disputed amounts rather than presenting them as collected funds.

Read the consequences of a missed installment and the releases promised after performance. An extremely favorable discount may remain unsuitable if it requires money already committed elsewhere.

Delancey Street's review can begin the advance discussion while construction counsel examines the project obligations. A sound proposal recognizes that a progress payment belongs to a continuing job, with responsibilities that remain after the bank records the deposit.