MCA Reconciliation Rights: Real Protection or Illusion?
Reconciliation is the promise that your payments flex with your sales — and whether it is real or illusory is the heart of an MCA.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Because an MCA is supposed to be a purchase of a percentage of your sales, your payments should fall when sales fall. Reconciliation (or "true-up") is the mechanism that adjusts the fixed daily debit back to the agreed percentage of actual receipts.
A real reconciliation right protects cash flow and supports the MCA’s legal structure; a sham one does neither.
Topics to check
A genuine right lets you obtain a reconciliation on request or automatically each period, with the funder required to refund or credit overpayments and adjust future debits to the true percentage of sales. It is mandatory, not discretionary, and does not require jumping through onerous hoops.
This is what keeps the funder genuinely at risk if your business slows — the feature that distinguishes an MCA from a loan.
Watch for reconciliation that the funder may "grant or deny in its sole discretion," that requires written approval before it takes effect, that imposes short deadlines and heavy documentation, or that lets the funder keep collecting the fixed amount in the meantime. These make the right illusory in practice.
When reconciliation is illusory and repayment is effectively fixed, courts and regulators are more likely to treat the deal as a disguised, potentially usurious loan.
Usury (Cornell LII Wex)Seek mandatory reconciliation on request (and automatically each month), a prompt refund of overpayments, an adjustment of future debits to the true percentage, and no continued over-collection while a request is pending.
If the funder will not give a real reconciliation right, treat the "percentage of sales" framing as marketing, not protection.
Key takeaways
- Reconciliation adjusts your fixed debit back to the agreed percentage of actual sales.
- A real right is mandatory, prompt, and refunds overpayments.
- Discretionary or approval-gated reconciliation is usually a sham.
- Illusory reconciliation can make a court treat the MCA as a disguised loan.
- No real reconciliation means the "percentage of sales" framing is just marketing.
Official resources
Legal-review notes
Guide confidence marker: Needs lawyer verification.
- Recharacterization based on illusory reconciliation is fact-specific and varies by state and court.
- Have counsel review the reconciliation clause and its effect on usury and enforceability.
Frequently asked questions
What is MCA reconciliation?
A mechanism that trues up your fixed daily/weekly debit to the agreed percentage of your actual sales, refunding or crediting overpayments when revenue is lower than projected. It is what is supposed to keep an MCA tied to real sales.
How do I know if reconciliation is real?
A real right is mandatory and prompt — not "in the funder’s sole discretion," not gated behind written approval while debits continue, and not buried under short deadlines and heavy paperwork. If it is discretionary, treat it as illusory.
Why does reconciliation affect whether an MCA is a loan?
Because a true MCA puts the funder at risk if sales fall. If reconciliation is illusory and repayment is effectively fixed, regulators and courts are more likely to recharacterize the advance as a disguised, potentially usurious loan.