Workout Agreement
A workout agreement is a restructured payment arrangement negotiated between a defaulted MCA merchant and the funder — typically modifying payment amounts, extending repayment timeline, or restructuring balance — providing alternative path to repayment short of judgment and asset seizure.
Why This Matters
Workout agreements are standard MCA collections practice for merchants in genuine financial difficulty. The typical structure: funder agrees to reduced payment amounts and extended timeline in exchange for merchant commitment to restructured payment plan, possibly with additional security (additional personal guarantee, additional UCC filings) or balance modification (forgiveness of accrued fees, reduction of remaining balance). Workout agreements benefit both parties when they produce higher recovery than alternative collection paths. Funders maintain workout teams with negotiation authority to reach mutually beneficial restructurings.
Frequently Asked Questions
Frequently Asked Questions
When do MCA funders agree to workout agreements?
When workout produces higher expected recovery than alternative collection paths (litigation, judgment enforcement). Funders consider merchant cooperation, business viability assessment, and alternative collection economics. Cooperative merchants in temporary distress typically receive workout offers; uncooperative or fraudulent merchants typically face hardline collection.
What's typical MCA workout structure?
Reduced daily/weekly payment (often 30-50% of original), extended repayment timeline (often 50-100% extension of original term), and possible balance restructuring (waiver of accrued fees, modest balance reduction). Specific terms negotiated based on merchant circumstances and funder workout policies.