MCA hardship programs exist, but not in the form most merchants imagine when they first hear the phrase. Understanding what they are, what they require, and what funders routinely omit from their descriptions can mean the difference between a program that helps and an agreement that simply creates a new set of problems.
Hardship Programs Are Not Forgiveness
The first thing to understand is that a hardship program does not reduce the balance you owe. It modifies the payment structure temporarily, usually by reducing the daily debit amount or switching to weekly payments. The total obligation remains. The pace of collection changes. Merchants who enter hardship programs expecting principal reduction are frequently surprised by this, and some sign agreements that extend their repayment timeline considerably without any reduction in the total amount extracted.
Eligibility Is Not Transparent
Funders do not publish hardship program eligibility criteria the way banks publish loan qualification standards. The criteria are internal, applied case by case, and subject to change based on the funder’s portfolio conditions at any given moment. A merchant who qualifies in March may not qualify in July under the same financial circumstances. This opacity is not accidental. It preserves the funder’s ability to deny applications without providing grounds for challenge.
What funders typically want to see is evidence that the revenue decline is real and documented. Bank statements, merchant processor reports, and sometimes a signed hardship letter explaining the cause. A seasonal business with a predictable revenue cycle will have a different conversation than a business whose revenue has declined due to a permanent market shift.
The Reconciliation Clause Is the Legal Foundation
Most MCA agreements contain a provision allowing the merchant to request payment adjustment when revenue declines. Funders rarely volunteer the existence of this clause during hardship applications. They prefer to treat the hardship program as a discretionary accommodation rather than a contractual obligation. The attorney’s role is to remind them that the reconciliation clause is not discretionary.
In 2024, a number of proceedings in New York state courts produced findings that funders who ignored documented reconciliation requests while continuing to withdraw fixed amounts were engaging in conduct that called the entire agreement’s loan characterization into question. That is the kind of precedent that changes how hardship conversations begin.
Fee Structures in Hardship Agreements
Some hardship programs come with restructuring fees. The funder charges a flat fee, expressed as a dollar amount or a percentage of the remaining balance, for the administrative work of modifying the agreement. These fees are sometimes disclosed clearly and sometimes buried in the modification agreement itself. The merchant signs to reduce the daily payment and discovers several months later that the fee was added to the outstanding balance, extending the repayment period further.
The attorney reviews any fee provisions before the merchant signs. A modification fee that adds several thousand dollars to an already stressed balance should be negotiated down or eliminated as a condition of entering the program.
Default Provisions Reset
When a merchant enters a hardship program, the original agreement’s default provisions may be replaced by the modification agreement’s default provisions. The new default terms are sometimes less favorable than the original ones, with shorter cure periods or accelerated balance triggers. This substitution is rarely highlighted in the funder’s presentation of the program’s benefits.
What the funder describes as a relief program may actually carry harder consequences for default than the original contract.
The Program May Not Stop ACH Debits Immediately
Merchants sometimes apply for a hardship program while continuing to have debits withdrawn at the original rate. The application process takes days or weeks. During that period, the existing debits continue unless the merchant or attorney negotiates an immediate pause as a condition of submitting the application.
Requesting an immediate debit pause at the same time as the hardship application is a standard practice among experienced MCA attorneys. Funders can accommodate it. They simply do not offer it unless asked.
The Program Ends
Hardship programs are temporary. The modification agreement will specify a duration, after which the payment schedule reverts to either the original terms or a new negotiated schedule. A merchant who stabilizes during the hardship period but does not secure a permanent modification may find the original debit amount reinstated before the business has fully recovered.
The exit from the hardship program should be negotiated as carefully as the entry. What happens at the end of the modified period, and under what conditions, should be in writing before the program begins.
A call with Spodek Law Group costs nothing and creates no obligation. But the attorney who reviews your agreement before you apply for a hardship program changes the terms of that application considerably.
