The withdrawal hit your account before the coffee shop on the corner opened its doors. By the time you checked the balance, the damage was already structural. The merchant cash advance funder had taken its daily cut, and that cut bore no resemblance to the percentage of revenue your agreement described.

Overpayment in the MCA context is not a billing error. It is a systemic condition. The daily debit was calculated against projected receivables at the time of origination, and when those receivables declined, the payment did not follow. What was supposed to be a floating percentage became a fixed extraction, and fixed extractions from a declining revenue base will drain any operating account to the point of dysfunction.

Document the Overpayment

Before any negotiation, any legal claim, any phone call to counsel, the documentation must exist. Pull three months of bank statements. Isolate every MCA withdrawal. Calculate what each withdrawal represented as a percentage of that day’s actual revenue.

If your agreement specified a purchase percentage of fifteen percent and the funder has been withdrawing amounts equivalent to thirty or forty percent of daily receipts, that gap is your evidence. It is also your leverage. Courts examining MCA disputes look at the relationship between the contracted percentage and the actual withdrawals when determining whether the agreement functions as a true purchase of receivables or as something else entirely.

In Davis v. Richmond Capital Group, the court considered whether fixed daily payments disconnected from actual revenue transformed the transaction into a loan. The documentation of that disconnect was central to the analysis. Without records, the argument remains theoretical. With records, it becomes arithmetic.

Invoke the Reconciliation Clause

Your MCA agreement almost certainly contains a reconciliation provision. The provision requires the funder to adjust your payment amount when actual receivables fall below the estimates used at origination. Most funders treat this clause as decorative. It is not.

A written reconciliation demand, sent via certified mail or through counsel, forces the funder to respond within the contractual window. Include your bank statements, your revenue records, and a calculation showing the disparity between the contracted percentage and the actual withdrawal rate. The letter should cite the specific section of your agreement and request adjustment to the contractual percentage applied against actual, not estimated, receivables.

We have filed these demands for restaurant owners in March whose winter revenue had fallen by a third while their daily debits remained unchanged. The funder’s initial response is often silence. The second response, after counsel follows up, tends to be more cooperative.

Request a Formal Payment Modification

Reconciliation adjusts the percentage. Modification restructures the payment itself. These are different mechanisms, and pursuing both simultaneously is not unusual.

A payment modification proposal should include a reduced daily amount tied to current revenue, a proposed duration for the modified terms, and a clear statement of the business’s financial position. Funders evaluate modification requests against the cost of enforcement, and enforcement in the MCA space is expensive, slow, and uncertain in outcome.

The strongest modification requests arrive with a narrative. Not a plea. A narrative supported by financials that shows the funder precisely why the current withdrawal rate will produce a default, and why a modified rate will produce full repayment over a longer horizon. Funders who understand their own economics will choose the modified repayment. Some do not understand their own economics. For those, the next two actions exist.

Revoke ACH Authorization Through Your Bank

Under NACHA operating rules, you possess the right to revoke an ACH debit authorization at any time. The revocation does not eliminate the underlying debt. It removes the funder’s ability to reach into your account each morning and take what it wants.

This is the action that produces the most immediate relief and the most immediate friction. The funder will notice. The funder will call. The funder may send a letter asserting breach. But the revocation itself is lawful, and the distinction between revoking a payment method and refusing to pay a debt is a distinction that matters in court.

Some business owners revoke ACH authorization and simultaneously open a new operating account at a different institution, redirecting their receivables to the new account. The original account remains open with a minimal balance. This approach is sometimes characterized as evasive. It is also sometimes characterized as prudent cash management during a period of financial distress. The characterization depends on who is describing it and what the MCA agreement says about depository account obligations.

I would not recommend this action without an attorney reviewing your specific agreement. The action is legal. The consequences are contract specific.

Engage Counsel to Evaluate the Agreement

Every MCA agreement is a commercial contract. Every commercial contract is subject to challenge on grounds of unconscionability, fraud in the inducement, breach of the implied covenant of good faith, and misrepresentation. Some MCA agreements are also subject to usury challenge if the transaction is recharacterized as a loan.

A 2024 ruling in the Southern District of New York reinforced that MCA agreements with absolute repayment obligations and illusory reconciliation provisions may be treated as loans rather than purchases of future receivables. The implications of that recharacterization are significant. In New York, criminal usury voids the agreement entirely. Not partially. Entirely.

An attorney who practices in this space can review your agreement in an hour and tell you whether the reconciliation clause is genuine, whether the payment structure supports a loan recharacterization argument, and whether the funder’s conduct in refusing to adjust payments constitutes a breach. That review is the foundation for every subsequent action, and the cost of the review is small relative to the cost of continued overpayment.

The MCA industry operates on a premise of inevitability. The payments will continue. The business will comply. The funder will collect. That premise holds only when the business owner does not know what options exist. Once the options are visible, the premise dissolves, and what remains is a negotiation between parties with competing interests and unequal information. Correcting the information asymmetry is the first action. The other four follow from it.

A first call to our office costs nothing and commits you to nothing beyond a conversation about what your agreement actually says.

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