Contract language controls. Use these definitions to prepare questions, not as a substitute for reviewing the actual agreement and circumstances.
- ACH withdrawal
- An electronic debit from the business bank account. MCA collections commonly occur daily or weekly through ACH.
- Commercial debt
- An obligation incurred for business purposes rather than personal, family, or household use.
- Creditor
- A person or company to whom the business owes an obligation.
- Default
- A failure to meet a contractual requirement. Payment and nonpayment events can both be defined as defaults.
- Factor rate
- A multiplier used in some MCA agreements to calculate a specified receivables amount. It is not the same as an annual interest rate.
- Hardship
- Documented circumstances showing why the current payment structure is no longer sustainable for the business.
- Merchant cash advance
- A transaction commonly documented as the purchase of a specified amount of future business receivables, collected through frequent remittances.
- Net proceeds
- The cash the business actually receives after prior payoffs, fees, and other deductions.
- Personal guarantee
- An individual owner’s contractual promise connected to a business obligation under the stated terms.
- Reconciliation
- A contract process that may adjust remittances to reflect actual receivables. Rights and procedures depend on the agreement.
- Renewal
- A new transaction that may pay an existing balance before delivering additional cash and creating a new obligation.
- Restructuring
- A negotiated change or coordinated resolution strategy involving the timing, payment, or other terms of an obligation.
- Stacking
- Carrying multiple merchant cash advances or similar obligations at the same time.
- UCC filing
- A public financing statement that may provide notice of a claimed security interest in business assets.