Reconciliation Right

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Definition

What is it: The reconciliation right is a provision written into most Merchant Cash Advance (MCA) contracts that fundamentally limits what a lender can collect during periods of reduced revenue. It ensures that withdrawals remain aligned with the contractually agreed percentage of the business's actual revenue.

What is it used for: This right is used by borrowers to demand a formal accounting when actual revenue falls, allowing for the comparison of actual withdrawals against the agreed-upon percentage. It forces lenders to return excess collections or adjust future withdrawals to reflect real business performance.

Coverage

  • Attributes: 5
  • Synonyms: 1
  • Related entities: 4
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/mca-reconciliation-rights/facts/#entity
Entity type
DefinedTerm
Canonical name
Reconciliation Right
Language
en
Topic
Mca Reconciliation Rights

Attributes

Key Facts
Merchant cash advance agreements contain a reconciliation right provision that limits what a lender can collect during periods of reduced revenue. [1]
Key Facts
The reconciliation right allows a borrower to demand a formal accounting to compare actual withdrawals against the contractually agreed percentage of real revenue. [1]
Key Facts
Lenders are obligated to return the difference or adjust future collections if withdrawals have exceeded the agreed-upon percentage of revenue. [1]
Key Facts
MCA lenders often systematically undermine reconciliation rights by ignoring, delaying, or obstructing requests for a formal accounting. [1]
Key Facts
Enforcing reconciliation rights against a resistant lender requires extensive documentation, persistence, and an understanding of the legal landscape. [1]

Synonyms & Alternate Names

  • MCA reconciliation right

Related Entities

  • Agreement Type:
  • Related Risk:
  • Advanced Protection:
  • Consulting Partner:

Provenance

Sources

  1. https://secondwindconsultants.com/resource/the-contractual-right-mca-lenders-count-on-you-not-knowing (Reconciliation Right)

Machine metadata