Declining an MCA Top-Up: 5 Steps Before You Answer the Offer

When your merchant cash advance funder offers a top-up, you can say no. But first do these five things: read the document to see what it actually does, get the real numbers in writing, find any clauses that give away your rights to protest, know the default terms in your current deal, and don’t let any of their deadlines decide for you.

Your funder drafted the offer document. They decided where to put the terms and conditions that get you stuck later if you sign. They got to design the pages, order the pieces, and compose the grammar. And they meant something specific when they drafted this contract. If you don’t read it, you don’t know if it will do what they promise. They do their due diligence. Do yours. Every contract also comes with boilerplate about rights, remedies, and maybe choice of forum or enforcement. These parts count, too.

Your funder may tell you this is a top-up, a renewal, a workout, a settlement, or a forbearance. Or maybe it’s a modification of your original agreement. Maybe this document contains more than one of those provisions. The words they use to label the transaction only tell you what they think of it. You look at a document to see what it actually does. So read the clauses, understand what they are saying, and then write down exactly how the document affects your liability, both now and in the future.

The Full Accounting Before You Sign

The offer letter says you’re getting new money on top of what you have. But how much? The advertised offer may tell you. But did they answer the specifics? Did they list every cost and the new cash? Do the numbers match when you work from the other end? You should ask about the payment of the old balance. Don’t let their talk about new money cover up any cash they want out of your business.

In New York and Texas, you have layers of protection when it comes to new offers that try to look bigger than they are. New York disclosure law (on deals up to $2.5 million) tries to get you the full accounting before you sign. The provider must tell you the total financing amount, the finance charge, the estimated APR, the total repayment, the estimated term, and whether early payment means extra finance charges. Texas addresses the play of advertising a big cash advance but requiring you to pay your existing balance before you get it. Under HB 700 (offers under $1 million), you must be told how much goes to prepayment charges and unpaid finance charges, plus the exact dollar amount your payout shrinks by.

The Release, Guarantee, Lien, and Default Terms

The financing document, even though it looks like the same thing on page one, may ask you to restate or reaffirm your personal guaranty. For the funder, that’s an advantage. They get a fresh signature, and any problems with the first signing become harder for you to raise. The MCA agreement may try to add a new confession of judgment (COJ). If you signed a COJ during your first time with this funder, be extra careful here. In Texas, a covered contract with a confession of judgment is unenforceable as a whole.

The new MCA document may include a general release, where they may succeed in having you give up claims and defenses against the funder from the original deal before you ever have a chance to see how valuable they might be in negotiation or litigation. It also can state your agreement that the original purchase of receivables is a true sale, not a disguised loan. That can undercut a central defense in MCA disputes. Lower payments have obvious benefits for your business. But the funder’s offer has legal consequences for you. Seeing them ahead of time helps you know what is reasonable for you to give up for a smaller payment.

Everything might be fine right now, but don’t sign anything until you know what happens if one payment is short or late. Does the deal call that a default? What counts as a default in your original contract? How does your right to cure work? Even one missed payment under the new terms may kick you into acceleration and the risk of larger and earlier payoff. Sometimes there is a grace period before acceleration takes place. That’s another reason to read every page.

Funders can set short deadlines for signatures. Don’t let that cloud your judgment about what to do, though. Your funder controls the timing of your answer. But not your decision about what to agree to. When your funder’s offer letter says it ”expires in 48 hours,” pay even closer attention to what the new contract does. A short signing window doesn’t make the release, guarantee, lien, and default terms any less important. Their effects will last far longer than the deadline used to sell them. If there’s pressure, that’s theirs, not yours. If you don’t agree with their conditions, can you offer revisions of your own?

Deal Checklist

None of this means you should never sign an extension or renewal. The funder may draft the first form. But it doesn’t have to be the last. If you want that new cash, here’s a deal checklist:

• some language removing the release so it doesn’t wipe out your defenses later,
• no inclusion of a true-sale acknowledgment,
• no new confession of judgment,
• a written promise to terminate the UCC filing (UCC-3) once paid,
• a guarantee of notice and a cure period before the whole balance accelerates.

If they say they can’t offer that? Ask for it anyway.

If your business owes too much across the board to several funders, it may not make sense to make a deal with one of them without looking at the whole picture. You risk moving the cash-flow problem from one funder to another. If you do clear away one of your problems, will your cash flow really support another obligation? If you are over your head, or already hit with accounts in restraint or judgments, you may want to consider Chapter 11 or Subchapter V bankruptcy. Filing a bankruptcy petition can trigger an automatic stay that stops covered collection activity.

Know your numbers. Read the whole document. Understand where default and acceleration might start. Check on your rights and defenses. You don’t need to jump at an MCA funder’s offer. You can seek sound legal advice or consider bankruptcy. But only after you get the terms and the math where you can study them.