Trucking Freight Conditions and MCA Debt: Six Cash Flow Questions

For a trucking carrier seeing freight volume down and operating costs at record highs, daily merchant cash advance debits add another fixed cost that wasn’t there before. You will need to ask the funder for changes while still in compliance and before changing banks, along with checking terms regarding any factoring you use and seeking early legal advice if things do not go as hoped. Do this at once, and don’t wait.

Unexpected changes that reduce EBITDA which include a drop in demand for hauling services, increasing operating costs such as fuel, lower rates, and other operating costs all have a direct impact on availability of cash flow for a trucking business. Cash available to pay fixed expenses such as a Merchant cash advance (MCA) debits is reduced with less margin, and an MCA that was affordable becomes an unneeded drain. So, if a trucking company loses a regular customer or lane and has less freight in a month, it is forced to pay a higher percentage of its receivables to fixed debt.

On top of that, broker freight waits 30 to 60 days to get paid. Carrier cost per mile went up again to a record $2.336 in 2025, with costs besides fuel up 4.2 percent. And fuel? $6.179 a gallon, $2.514 a gallon more than a year ago. Flatbed carriers lost 0.5 percent on operations in 2025.

An MCA is sold as a purchase of future receivables and the funder agrees to share the risk, but then takes a fixed debit regardless of changes to revenue. This looks like a loan. Your agreement may include a reconciliation clause that allows for an actual reconciliation of revenue generated to loan payment amounts. This is a clause to pay attention to if the business is going through changes that have reduced revenue, because an improperly applied reconciliation clause is the difference between making it through and defaulting.

If you are like many carriers, you asked for the loan reconciliation and did not get one. Get everything in writing, and keep copies of every request and every denial. Include industry rate data that will show that your fall in revenue was not caused by your management but rather by changes in the industry. Include data on broker payments made after the due date.

What about situations where you have an arrangement with two lenders and both are claiming a security interest in the same receivables? The funder claims they have a lien on receivables as collateral for the “sold and assigned” MCA. But, the factor has already taken the funds, claiming priority. Someone isn’t going to get paid. And that someone might just end up being you.

Often the factor filed or perfected their security interest in the receivables first, and they would have the stronger claim to the receivables if there were a lawsuit over who has the stronger claim. Don’t sign anything such as a subordination agreement from the MCA funder. Always talk with a lawyer before signing, and have the lawyer read it with your factoring contract. The funder may have a weaker claim than it says, and by asking your attorney to take a look before you sign, you may prevent giving away more of your future receivables than is necessary.

In a difficult financial situation, taking another cash advance to pay down or keep up with another advance will not help but will make things worse. This only increases future debt load, since the new lender will also ask for a daily debit from an already strained bank account. You can end up in a cycle of increasing debt that eventually can’t be paid off.

The cash advance payment calendar reveals the cost per day to run. A typical stack can take about $2,950 per business day and roughly $62,000 a month before buying any diesel. Just look at the effect on your business if rates drop or a truck goes down for service. A good way to consolidate MCA debt is only to do so if the loan or purchase will lower your total cost of capital. But many offers of consolidation are only a new advance with a new UCC-1 lien on top. With any promise to consolidate advances, ask for the specifics in writing, read them, and have a lawyer review the full stack first.

To Stop an MCA Debit

By changing your bank account to stop an MCA debit you are not stopping the underlying debt, as it is still enforceable. Moving money into a different account while you wait for reconciliation is an event of default for most MCA contracts. There can be triggers for speeding up the full balance, starting a personal guarantee, or a confession of judgment. Work on the reconciliation demand first and put it on the record. And get a lawyer involved.

Texas has new laws effective September 1, 2025, and it is a good idea to check the most recent version of your state rules. For example, for a funder without a perfected, first-priority interest in an account to set up an auto debit from a Texas business account is illegal under Texas law. Confession of judgment clauses are void, and any funder who uses a clause like this faces $10,000 in penalties for each. New York in 2019 disallowed a confession of judgment filed there against a business that didn’t have a place of business in New York.

Bankruptcy Can Be an Expensive Last Resort

Unless the company is insolvent or can’t cover basic operating expenses, bankruptcy can be an expensive last resort. Settlement is often the cheaper option, a lower cost for your business to buy back its receivables and future revenue stream and regain control of its cash flow.

When a carrier is facing a hard time, settling the debt for less than is owed does happen in many cases. The deciding factor can include hardship, a good record of asking for reconciliation, and the funder’s own cost to collect. Funders know the reality that a liquidated trucking company pays very little in the end.

If you do file in bankruptcy, the automatic stay halts most collection efforts against you, which helps right away. If you qualify for Subchapter V, which is if your total debts are $3,424,000 or less and you are in business, there are additional protections for a trucking company. It may not be easy to carry on the factoring relationship while you work through a filing, and brokers may react, too.

Acting before you miss payments preserves leverage for discussion with the funder, or a lawyer. The earlier you address the issue, the more options there are. Seek help before you change banks or stack on yet another advance.