Default Acceleration
Default acceleration is the contractual MCA provision triggering immediate full balance due upon default events — missed payment, account closure, business cessation, breach of representations — converting incremental payment obligations into lump-sum collection actions.
Why This Matters
Default acceleration is standard in MCA contracts and dramatically affects merchant exposure during financial difficulty. A merchant with $30,000 remaining balance under normal payment terms suddenly faces $30,000 acceleration upon default trigger — owed immediately rather than over remaining term. Acceleration enables rapid collection action including UCC enforcement, judgment collection, and asset seizure. Workout negotiations sometimes restore deferred payment terms in exchange for restructured balances or additional security, but acceleration provides funder leverage in default situations.
Frequently Asked Questions
Frequently Asked Questions
What events trigger MCA default acceleration?
Standard triggers: missed payment (typically 1-3 missed payments per contract terms), account closure (merchant closes the bank account designated for ACH withdrawals), business cessation, material misrepresentations on application, and stacking violations (taking unauthorized additional MCA positions).
Can MCA default acceleration be reversed?
Sometimes through workout negotiations where the funder agrees to restored payment terms in exchange for restructured balances, additional security, or other concessions. Outcome depends on funder policy and merchant negotiating position. Active engagement during default typically produces better outcomes than avoidance.