Options Before You Are Sued: What MCA Borrowers Should Do First

Time Matters

The window for negotiation is often wider before legal action begins. Once a lawsuit is filed or a confession of judgment is entered, your options may become more limited and the process more expensive for everyone.

If you have defaulted on a merchant cash advance and have not yet been served with a lawsuit, here are the options typically worth exploring.

Open Settlement Discussions

Some funders will consider a lump-sum or structured settlement for less than the full remaining balance. Not all will — it depends on the funder, your payment history, and your overall situation. Earlier outreach generally gives you more options.

Settlement amounts vary significantly based on the funder and the specifics of your case. No particular outcome can be promised.

Propose a Modified Payment Arrangement

Rather than the original daily or weekly ACH schedule, we may be able to discuss a modified payment structure that better reflects your current cash flow. Funders are not required to agree, but some prefer this to the cost of pursuing legal action.

Not all funders will agree to modifications. The likelihood depends on the funder, the amount owed, and how long payments have been missed.

Request a Temporary Pause in Collections

In some situations, funders will pause collection activity while settlement discussions are ongoing. This is not something they are required to do, and it is not available in all cases.

Forbearance agreements are pursued where appropriate — not promised.

Understand Your MCA Agreements

MCA contracts vary considerably. Some contain provisions that may affect your negotiating position. It is worth understanding what you signed before deciding how to proceed.

Note: We are not attorneys. If legal issues arise from reviewing the agreements, we will recommend you consult with a licensed attorney.

Coordinate Across Multiple Positions

If you have more than one MCA, settling with a single funder without considering the others can create problems. A coordinated approach is generally more effective — though outcomes with multiple funders are inherently less predictable.

More funders means more complexity. Realistic expectations are important here.

The Bottom Line

The earlier you act, the more options you typically have. Every day of inaction narrows what is achievable. If you are in default and have not yet been sued, now is the time to understand your position clearly.