Business Debt Relief Glossary

The Debt: How an MCA Is Built

The structure of a merchant cash advance — the terms that explain why the daily debit hits so hard and how stacking happens.

Merchant Cash Advance (MCA)

A purchase of a business’s future revenue at a discount, repaid through fixed daily or weekly ACH withdrawals. Priced as a factor rate rather than an APR, it’s among the fastest-funding products and also the most expensive. More on merchant cash advances.

Factor Rate

A multiplier (for example, 1.40) used to express total payback on an advance. A $50,000 advance at a 1.40 factor rate repays $70,000. It’s not an interest rate and isn’t directly comparable to an APR — which is part of why the true cost is easy to underestimate.

Holdback / Specified Percentage

The percentage of daily card sales or revenue an advance is supposed to take. In practice many funders collect a flat daily dollar amount estimated from past sales — which is what reconciliation is meant to true up when revenue falls.

Daily / Weekly Remittance

The fixed ACH payment a funder pulls from the business bank account each business day or week until the purchased amount is collected. Stacking several of these is what overwhelms cash flow.

Stacking

Taking a second, third, or fourth advance on top of an existing one. Each adds another daily debit and another UCC lien, compounding the cash-flow drain until operations fail.

Personal Guarantee

A clause in which the owner personally promises to repay the advance if the business can’t. It’s why a default isn’t only a business problem and can reach the owner’s personal assets.

UCC-1 Lien

A public claim a lender files against business assets under the Uniform Commercial Code to secure financing. Many funders file a blanket UCC-1 over all assets, which can block new financing until released. How to release a UCC lien.

When It Goes Wrong: Default and Collection

The terms that show up once payments fail — the chain of events from a missed debit to a frozen account, and the one contract right that can prevent it.

Default

An event, defined in the agreement, that lets the funder invoke its remedies — typically a missed or stopped payment, a revoked ACH, or a closed account. It triggers fees, acceleration, and collection. What happens if you default.

Acceleration

A contract right that lets the funder demand the entire remaining balance at once upon default, rather than collecting it over time. It can turn a missed daily payment into a demand for the full balance.

Confession of Judgment (COJ)

A document some funders require at funding in which the borrower pre-agrees that, on default, the funder may obtain a court judgment without a trial or notice. New York restricted out-of-state COJ enforcement in 2019. More on COJs.

Restraining Notice

A legal notice served on a bank after a judgment that freezes the account up to the judgment amount — the mechanism behind a suddenly frozen business bank account. What to do if your account is frozen.

Bank Levy

The actual seizure of frozen funds by a marshal or sheriff to satisfy a judgment, after a restraining notice has held them. Where a restraint freezes, a levy collects.

Reconciliation

A clause in most contracts that lets the business request a lower remittance when revenue drops, truing the flat daily debit up to the agreed percentage of actual revenue. Widely underused. How to request reconciliation.

The Ways Out: Relief Options

The paths out of distressed advance debt — what each one actually does and who it fits.

Reverse Consolidation

A program that funds a separate account to make the payments on existing advances while the business makes one new, lower weekly payment. Built for stacked borrowers who can’t qualify for a clean consolidation loan; it lowers the payment, not the balance. More on reverse consolidation.

Debt Consolidation

A single new loan that pays off all existing debts, leaving one payment to one lender. It requires qualifying for the new loan and is usually the cheapest total cost when available. Consolidation vs. reverse consolidation.

Debt Mediation

A structured resolution in which a specialized firm negotiates with all of a distressed business’s creditors at once to build one consolidated payment, halt collections, and often reduce the balance. Built for over-leveraged businesses in or near default. More on debt mediation.

Debt Settlement

Negotiating to resolve a single balance for less than the full amount owed, usually on an account already in default. It reduces the balance but can affect credit and may create taxable forgiven income. Can you settle an MCA?.

Subordination

An agreement in which an existing lienholder lets a new lender take priority ahead of it, rather than fully releasing its lien — clearing the way for a consolidation loan to fund. More on liens and releases.

ACH Revocation

Instructing your bank to stop a preauthorized ACH debit. It can stop an advance’s daily pull, but doing so is almost always a default with serious consequences — so it should be part of a planned strategy, not a panic move. What happens if you stop the ACH.