Glossary · After funding
Default
In an MCA, a default is a breach of the contract, such as blocking the funder's debits, switching banks, diverting receipts or stacking against terms.
Also called MCA default, breach, event of default
Because an MCA is generally structured as a sale of receivables, slower sales on their own are supposed to be handled through reconciliation, not treated as default. Contracts typically define default as actions like blocking debits, closing or switching the account, hiding receipts, selling the business without notice or taking prohibited additional financing.
After default a funder may pursue the personal guaranty, its UCC interest, collections or litigation, and may report the merchant to DataMerch. For the broker, a default inside the clawback window can cost the commission.
What counts as default depends on the contract and state law. This is general information, not legal advice.
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Related
- FeatureCommissions and reconciliationTrack expected versus received commissions per funded deal, split them with reps and partners, handle clawbacks, and reconcile lender commission statements line by line.Read
- GlossaryReconciliationReconciliation is a merchant's contractual right to have fixed MCA payments adjusted to match actual receipts when sales fall, a key feature of the true-sale structure.Read
- GlossaryPersonal guarantyA personal guaranty makes a business owner personally answerable for the merchant's obligations. In MCAs it is usually a performance guaranty, not a payment guaranty.Read
- GlossaryClawbackA clawback is a funder taking back an ISO's commission because the merchant defaulted or stopped paying within a set window after funding, often 30 to 90 days.Read
- GlossaryConfession of judgment (COJ)A confession of judgment is a signed document letting a creditor obtain a court judgment without a lawsuit if the signer defaults. Its use in MCA has been restricted.Read
- GlossaryDataMerchDataMerch is an industry database where MCA funders and brokers report and look up merchants with defaults, fraud or stacking problems before funding.Read