MCA Settlement Offer Letter: Template and 6 Terms to Address

The amount offered is only one term of the settlement. A business that negotiates the payment while leaving the release for later can discover that the parties never agreed on what the payment was supposed to resolve.

A useful offer identifies the proposed exchange without pretending to be the final agreement. The six terms below are drafting priorities, rather than a universal statutory formula. Counsel should adapt the language where litigation, a disputed guaranty or questions about contract formation are involved.

1. Identify the parties and the agreements being resolved

Begin with the business’s legal name and each agreement the proposal covers. Use dates and account references that allow the recipient to identify the transaction without inference.

The party communicating may be a servicer, the original funder or an assignee. Ask who has authority to accept the proposal and provide the contemplated release. A settlement should not depend on the assumption that all related entities act as one.

An individual guarantor needs separate treatment. State whether the proposal seeks a release of that person and identify the obligation at issue. A letter addressed to the company’s balance may not communicate that additional request.

Where several advances exist, distinguish the agreements included from those outside the proposal. This avoids a later disagreement about whether one transfer was intended to settle an account or several obligations.

2. State an amount and schedule the business can perform

The offer should identify the total proposed payment, the due date and any installment structure. If funds depend on a specified event, describe that condition accurately or wait until the funding is confirmed.

A schedule deserves a cash forecast. Compare the proposed dates with expected receipts and the expenses required to continue operating. The business should not offer a payment simply because it can assemble the first installment.

Request written payment instructions from an authorized recipient. Verify those instructions through a known channel before transmitting funds. The definitive agreement should explain how payments are credited and how completion is confirmed.

If the funder counters with a different schedule, compare the total and timing rather than focusing on the first payment. An apparently manageable opening amount can conceal a final payment the business has no plan to fund.

3. Describe the release the payment is intended to purchase

New York General Obligations Law section 15-303 prevents a written release from failing merely for lack of consideration or a seal. It does not write the release’s scope for the parties.

The offer should identify the claims and obligations to be resolved, including any guaranty that requires release. Counsel can then assess the operative language in the definitive document.

Timing matters. Does the release occur upon execution, receipt of payment or completion of an installment schedule? The proposed agreement should make the trigger clear and explain what remains during performance.

A release can also contain reservations. Read those provisions alongside the broad language appearing earlier in the document. A clause that appears to resolve everything may be followed by an exception affecting the very claim the owner wants concluded.

The offer need not contain a full release drafted without legal review. It should make the requested result visible so the recipient cannot mistake the proposal for a payment on account.

This is often the longest part of the discussion because it establishes what “finished” means. An owner who has spent months negotiating the amount may have little patience left for drafting. The remaining language still deserves attention.

Ask whether the proposed release is mutual and what the business would surrender through its own release. The owner may be asked to relinquish claims beyond a dispute over the unpaid balance. Counsel should compare those provisions with the records before advising acceptance. An offer can identify the intended commercial result while leaving the precise legal wording for that review, provided the parties understand which matters remain open.

4. Address litigation and financing statement action

If a lawsuit is pending, identify it and request the agreed disposition. The payment arrangement should explain who prepares the filing, when it will be completed and how the business receives confirmation.

New York CPLR rule 3217 governs voluntary discontinuance and includes a default rule of discontinuance without prejudice unless otherwise stated, subject to the rule’s provisions. Counsel should ensure that the intended disposition appears in the actual document.

Any financing statement requires a separate instruction. Identify the filing and ask the definitive agreement to address the required termination action and its trigger. New York UCC section 9-513 imposes duties under specified conditions; a proposed settlement does not establish that those conditions have already occurred.

If a judgment exists, counsel should address its satisfaction or other agreed treatment. A letter proposing a discount is not itself a filed satisfaction.

5. Define the process for acceptance and further documentation

The recipient should know where to respond and whether the business is requesting a draft agreement for review. Counsel should assess the effect of any acceptance language rather than assume an email exchange can never bind anyone.

Sample opening proposal: “The business proposes [amount] payable [schedule] to resolve [identified agreements and claims], including the requested release of [identified parties or guarantors]. The proposal contemplates a definitive written agreement addressing the release trigger, [case disposition], and [identified financing statement action]. Please confirm your authority to negotiate and provide your response to [contact].”

Add any material condition on available funds and have counsel review the completed version. A settlement heading is not a universal protection against the legal effect of statements in the letter.

6. Reserve the details that determine successful performance

The final agreement should address payment failure, notice and any opportunity to cure. It should also identify charges that remain payable and explain the consequence of a late installment.

Potential tax consequences require separate advice. The IRS guidance on canceled debt explains that cancellation may produce income, with exceptions and exclusions. A promised reporting form does not replace an assessment of the transaction.

Keep the executed agreement, payment confirmations and completion documents together. The owner should be able to demonstrate performance without searching several email accounts.

Delancey Street offers a confidential initial review of MCA settlement possibilities through its commercial settlement service. Legal representation remains distinct and is provided through independently licensed counsel. Confirm scope and fees before authorizing a proposal.

The opening letter should make the business’s position understandable without overstating its legal effect. Its value lies in the agreement it helps the parties reach, followed by the performance that allows both sides to close the file.