How to Read an MCA Agreement: 9 Questions Before You Sign or Respond

The signature page cannot tell you where the agreement places the risk of declining revenue. A first reading should expose that allocation, while leaving enough time for counsel to examine provisions whose consequences extend beyond the advertised payment.

1. Questions One and Two: What Arrives and What Is Owed?

The first question is how much usable cash the business receives. Compare the purchase price or advance with fees deducted at funding, amounts directed to an earlier balance, and the deposit expected in the operating account. Those figures can differ without the difference appearing in the daily payment quotation.

The second question is what the business must deliver in exchange. Locate the purchased amount or repayment obligation and identify any additional charges described elsewhere. A factor figure does not explain the timing of collection, and the headline amount may not include every cost claimed after default.

Keep each schedule and attachment in the reading packet, including terms incorporated through another document. A provision that appears incomplete on the main page may rely on a definition elsewhere. Missing attachments should be obtained before the business relies on its interpretation.

Write the figures beside their contractual labels. Do not rename the purchase price as profit or treat a refinancing payoff as cash available for payroll. A small table of actual amounts can expose more than several pages of promotional language.

If the numbers do not reconcile, obtain a written explanation before proceeding. An agreement can be difficult without being unlawful, but unexplained differences are a poor basis for a financing decision. The business should understand the transfer it is authorizing.

2. Questions Three Through Five: Who Bears a Revenue Decline?

In LG Funding v. United Senior Properties of Olathe, a New York appellate court examined reconciliation, the existence of a finite term, and recourse upon bankruptcy when considering whether repayment was absolute. The court allowed a usury defense to remain and denied the funder's request for summary judgment. It did not declare every MCA unlawful.

The third question is therefore how reconciliation operates. Find the provision that permits an adjustment to collections when actual receipts differ from the estimate. Read who must request it, what records are required, and whether the provision describes an obligation or leaves the decision to the provider's discretion.

The fourth question is whether the agreement imposes a fixed completion date or another mechanism that makes full payment inevitable despite a genuine revenue decline. A projected duration used in a sales discussion may differ from a contractual deadline. Preserve that distinction when asking counsel about the transaction.

The fifth question concerns default. Locate the events that permit acceleration or other remedies, then compare them with provisions saying the provider assumes the risk of lower receipts. A clause addressing business failure can matter as much as the paragraph announcing that the transaction is a purchase.

The cited court examined language allowing adjustment at the funder's sole discretion together with provisions concerning inability to pay and bankruptcy. The relationship among those provisions mattered. Reading reconciliation in isolation would have omitted the terms that helped explain the allocation of risk.

The practical review should also include what has happened under the agreement. If the business requested an adjustment, preserve the request and response. Contract language and performance can present different questions, and a folder containing only the executed agreement may leave the relevant history incomplete.

There is no reliable fifteen minute deadline for completing this analysis. A short first pass can identify the pages that deserve attention. Where the contract puts the owner or operating assets at risk, the time required for a sound review should follow the documents.

3. Questions Six and Seven: Who and What Secure Performance?

The sixth question is what the owner has signed. A guaranty may describe performance obligations, payment duties, or particular conduct that exposes the signer to a claim. The word guaranty alone does not establish when personal liability arises or how much the provider can demand.

Compare the named guarantor with the signature block and the obligations incorporated by reference. A person who signs for an LLC can also sign in an individual capacity elsewhere in the same packet. Counsel should assess each signature in relation to the promise it supports.

The seventh question is what collateral and filing authority the documents provide. Read the security agreement and any authorization alongside the financing statement if one has already been filed. A public filing should not be treated as a substitute for the underlying agreement.

For example, New York's UCC filing rules recognize authorization associated with a security agreement under specified conditions. That general rule does not establish that every proposed filing covers the correct debtor or collateral. The actual record still needs comparison.

4. Questions Eight and Nine: How Does a Dispute Proceed?

The eighth question concerns the process for notices and responses. Locate the addresses, permitted delivery methods, and any stated opportunity to correct a default. Do not invent a cure period where the agreement provides none, or assume that an informal message satisfies a formal notice requirement.

The ninth concerns the forum and dispute procedure. Find any venue, arbitration, jury waiver, or confession provision and ask counsel to assess its effect under applicable law. The presence of a clause does not establish its enforceability. Keep the entire dispute section together for review.

5. Bring the Difficult Pages to Delancey Street and Counsel

Delancey Street is a debt settlement company that can discuss negotiation options where an existing MCA burden has become difficult to sustain. An attorney should assess legal defenses and enforceability. Those services answer related questions, but the company should not be presented as a law firm.

A useful first conversation identifies the amount outstanding, the payment the business can support, and the provisions that appear inconsistent with its experience. Include correspondence about adjustments or alleged default. The goal is to turn an uncertain objection into a question that can be examined.

Ensure that any proposed resolution includes the full payment obligation and service fees. Ensure also that the business understands which claims and collateral rights will remain after performance. A negotiated payment schedule needs the same attention as the original contract.

These nine questions are a reading method rather than a certificate that an agreement is safe. Some contracts will require more questions. The value of the first review lies in recognizing where the words on the page require a decision before the next signature.