MCA Payoff Letter Request: How to Obtain and Check a Written Balance

Request a payoff letter from the finance company when trying to get out of an MCA. Make sure you receive a written confirmation, because you can’t hold someone to a phone figure. Confirm the number is correct by comparing it against your agreement and repayment schedule, paying close attention to the early payoff disclosure. After making your final payment, get something back in writing that confirms you have paid the agreement in full.

Ongoing communication is absolutely necessary during a merchant cash advance buyout. You will speak to the funder over the phone about terms. However, it’s too easy to say anything over the phone. Misunderstandings are common, and it’s difficult to verify what you two discussed once you are off the phone. Plus, people on the phone can make mistakes - and sometimes, your payment amount won’t reflect what was said on the call.

Be Ready to Inspect Your Payoff Letter

Before calling your funder, be ready to inspect your payoff letter. You’ll need every MCA agreement you signed and all the addendums. Have your payment history of your daily or weekly withdrawals. Access to your bank statements for the last three to six months will also help. If you paid a portion of your advances back through card holdback, you’ll need the payment history from your processing company too.

This matters because not every MCA is structured the same. Some MCAs take a fixed dollar amount from your bank account in a daily or weekly ACH. Others take a fixed percentage of your card receipts through a holdback. Some contracts have reconciliation clauses that allow a payment review when your receipts are lower. To get a review, there are contract terms and a specific submission process to follow.

If your offer is $2.5 million or less, New York law mandates how your lender discloses early payoff fees. At the offer stage, your provider has to say whether paying off early means paying off any unpaid finance charge, and the maximum dollar amount. If the payoff letter demands more than it did or shows unpaid fees when the original offer didn’t, there’s a problem.

Just because a payoff letter lists a number doesn’t mean everything else is explained. Look for comments regarding additional fees, including late fees and default or collection costs. Are your daily or weekly ACH withdrawals going to end? The release of a personal guarantee and any lien or UCC filing should also be addressed.

Does your letter cover one account, or several agreements? If a lawsuit or judgment exists in court, the letter should also say whether they’ll be dismissed or satisfied. Hire a lawyer to review the letter before you pay if you feel unsure.

Proof of Final Payment

Have a record of what happened: the payoff letter, payment confirmations and bank records if you were making withdrawals directly from your bank account. And once you have made the payoff payment and it has cleared, get a written record that confirms the status of the account. Get written proof of the UCC-1 filing termination. Funders must file or send it within 20 days after you made the signed demand, and after paying off the money owed.

Sometimes a funder keeps debiting the account or overcharges. In 2020, the FTC alleged merchant cash advance provider Yellowstone Capital withdrew from merchants’ accounts for days after full payoff, sometimes refunding only after a complaint. Have your payoff letter and proof of final payment, and the bank lines for each later debit. In writing, ask the funder to stop debiting your bank account, refund the overpayment, and give you a letter saying you paid in full.

It’s tempting to stop withdrawals yourself. Do not assume closing the account or denying payment resolves the issue, as it might do the opposite. The company who gave you the advances can move to collect what’s due. Instead, talk to an attorney.

Settlement Terms

If you cannot afford the full payoff, or you are trying to work out a settlement to reduce the debt, a payoff letter can be a starting point for discussions. But your funder doesn’t have to accept what you offer. Beware that even if you are in settlement talks, the daily or weekly payments may continue unless the funder agrees. Settlement terms aren’t complete until documented and signed. And there should be a written release of the remaining balance.

If a portion of the amount is forgiven, consult with a tax professional about whether there will be any tax consequences. Keep every document from this process in one place. That includes copies of your payoff letters and demand letters, as well as every letter from the lender.