Pausing MCA payments without triggering a default is possible. It requires knowing which mechanisms exist, which ones the funder controls and which ones you do, and how to invoke each one in a sequence that keeps the account from moving into enforcement.
Invoke the Reconciliation Clause
Most MCA agreements contain a provision allowing the merchant to request an adjustment to daily payments when business revenue has declined. This clause is not a favor. It is a contractual right, and invoking it properly requires a written demand that references the provision by section, documents the revenue decline with bank statements or processor reports, and requests a specific adjusted amount rather than an open-ended reduction.
A funder who receives a properly documented reconciliation request and ignores it has not simply declined an accommodation. Under the framework applied in several Southern District proceedings, the failure to honor a genuine reconciliation demand strengthens the argument that the MCA was never a true purchase of receivables and was instead a loan subject to usury statutes. The reconciliation clause, when invoked correctly, is both a payment mechanism and a legal lever.
Request a Negotiated Pause Through Counsel
Before the account goes into technical default, an attorney can request a standstill directly with the funder’s legal department. The standstill is not a formal program. It is a negotiated temporary halt on ACH debits while the parties engage in good-faith discussions about a modification or settlement. Funders will often agree to a standstill of one to three weeks when they believe litigation is a realistic alternative.
The standstill request must be in writing, must reference the nature of the dispute or financial hardship, and must propose a timeline for resolution. A verbal request carries no weight. A written request from counsel carries considerable weight.
Trigger the Hardship Program Application
Many funders operate internal hardship programs that authorize a temporary reduction or pause in collections. Submitting a formal hardship application, with supporting financial documentation, puts the account into a review status that typically pauses collections during the review period.
The pause during review is informal and not guaranteed. But funders who continue collecting at full rate while an application is pending, and who later deny the application, create a record that can be used in subsequent litigation. Most funders prefer not to create that record, and collections often slow during the review period even when no formal pause is granted.
Negotiate a Temporary Forbearance Agreement
A forbearance agreement is the most formal version of a payment pause. The funder agrees in writing to refrain from collecting for a specified period, typically thirty to sixty days, in exchange for the merchant’s agreement not to assert certain defenses during that period. The attorney negotiates the scope of any defense waiver carefully. A forbearance that requires the merchant to waive usury defenses or reconciliation claims is not a neutral pause. It is a paid-for suspension of legal rights.
The defense waiver in a forbearance agreement is often worth more to the funder than the two months of paused collections. Trade it accordingly.
Substitute a New Payment Method
In some circumstances, the merchant can negotiate a switch from ACH bank debits to credit card holdback, or from daily debits to weekly manual payments, as part of a temporary modification. These structural changes do not reduce the balance, but they change the mechanics of collection in ways that give the business more liquidity during a recovery period.
The substitution must be memorialized in a written modification to the original agreement. Verbal agreements about payment mechanics are unenforceable and create the risk that the funder resumes ACH debits without notice once the period of accommodation ends.
One conversation with Spodek Law Group is enough to identify which of these paths is available in your specific situation. The call costs nothing. The clarity it provides is considerable.
