Most owners sign a merchant cash advance in minutes and read it for the first time when something goes wrong. These ten clauses decide what you really owe, what happens when sales slow, and what the funder can do if you fall behind.
The short answer: The ten clauses that matter most in a merchant cash advance contract are the purchase price and purchased amount, the specified percentage, the remittance method, reconciliation, the events of default, the personal guarantee, any confession of judgment, the security interest and UCC rights, the anti-stacking clause, and the governing-law and venue terms. Together they set your real cost, whether payments can fall with sales, and how fast a funder can collect.
Pull out your agreement and look for these ten sections. Funders use different headings, so search for the key words in each.
The purchase price is what the funder pays you. The purchased amount (or “receivables purchased amount”) is what you owe back. Divide the second by the first to get your factor rate. Then check what actually hit your bank account: origination, underwriting and ACH fees deducted up front make the real cost higher. Our MCA APR table shows what common factor rates cost per year.
This is the share of your future receipts the funder bought, often 5% to 25%. It matters because it is the basis for reconciliation: your payments are supposed to reflect that percentage of what you actually take in.
How the funder collects: a fixed daily or weekly ACH debit, or a split of card sales through your processor. A fixed debit is an estimate of the specified percentage. If it’s set far above what that percentage of your real sales would be, note it; it’s the starting point for a reconciliation request.
The clause that lets you ask the funder to adjust your payments to match your actual receipts. Check how to request it (usually in writing with bank statements), how often you can, and whether the funder must adjust or merely “may.” This clause matters in disputes too: courts weigh it heavily when deciding whether an MCA is really a loan. See how a true-up works.
The list of things that let the funder declare you in default: blocking or reversing debits, changing bank accounts or processors, taking another advance, selling the business, or giving false information. Many contracts make several of these an immediate default with no cure period.
What happens next: the full remaining balance becomes due, default fees are added, and the funder can enforce the guarantee, notify your customers to pay it directly, and sue. Read this section before you ever stop a payment. See what happens when you default.
Almost every MCA has one. Some guarantee only your own performance (you won’t divert receivables or lie), while others guarantee the full balance. Know which you signed; it decides whether the funder can come after you personally if the business fails. See your personal guarantee after the business closes.
A signed statement that lets the funder get a judgment against you without a full lawsuit. New York stopped accepting them against out-of-state defendants in 2019, and several states restrict them, but they still appear in contracts. Learn more about confessions of judgment in MCAs.
The clause granting the funder a security interest in your receivables and other assets, which it records with a UCC-1 filing. It also usually authorizes the funder to notify your customers to pay it directly after a default. Check what collateral is listed and whether earlier lenders already have a claim. See UCC-1 filings explained.
The anti-stacking clause makes taking another advance a default. The governing law and venue clauses decide which state’s law applies and where you can be sued, often New York, plus any jury-trial waiver or arbitration requirement. These determine how and where any dispute plays out.
For each advance, write down: amount received, purchased amount, factor rate, payment and frequency, specified percentage, whether reconciliation is mandatory, the guarantee type, whether there’s a confession of judgment, and the governing law. With more than one advance, that page is the map for every decision that follows. Our MCA calculator turns the numbers into an APR and payoff date for each.
What should I look for in an MCA contract?
Start with the purchased amount and fees (your real cost), the specified percentage and reconciliation clause (whether payments can drop with sales), the events of default and remedies, the personal guarantee, any confession of judgment, and the governing-law and venue clauses.
What is the specified percentage in an MCA?
It is the share of your future receipts the funder purchased. Your payments are supposed to reflect that percentage of actual sales, which is the basis for requesting a reconciliation.
Is a confession of judgment in my MCA enforceable?
It depends on your state and where the funder tries to file it. New York no longer accepts them against out-of-state defendants since 2019, and several states restrict them. An attorney should review yours.
What counts as a default on an MCA?
Common defaults include blocking or reversing debits, changing bank accounts or processors without consent, taking another advance, selling the business and giving false information. Check your contract’s list.
This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Renaissance Capital Advisors provides business consulting services and is not a law firm. Talk to a licensed attorney about your specific contract and any legal deadline.
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