How to Request a Reconciliation Under a Merchant Cash Advance Agreement
Many merchant cash advance agreements provide that the funder will collect a specified percentage of the business’s actual receivables. Because daily or weekly withdrawals are usually based on estimated receivables, the agreement may also give the merchant the right to request a “reconciliation” when actual revenue falls below those estimates.
A reconciliation request asks the funder to review the merchant’s actual receivables and adjust the withdrawals so they correspond to the percentage stated in the agreement.
Why a Written Reconciliation Request Matters
If your business revenue has declined, do not rely solely on telephone calls with the funder. Submit a clear written request and comply as closely as possible with the reconciliation procedures stated in your particular agreement.
A properly documented request may become important if the funder later declares a default or files a lawsuit. Depending on the language of the agreement and the surrounding facts, the funder’s refusal to perform a required reconciliation—or its failure to meaningfully consider a properly supported request—may support a defense or counterclaim for breach of contract.
The request may help establish that:
- The business’s receivables genuinely declined.
- The existing withdrawals no longer reflected the agreed percentage of actual receivables.
- The merchant invoked the contractual reconciliation procedure.
- The merchant supplied the requested financial documentation.
- The merchant was attempting to comply with the agreement rather than refusing to perform.
- The funder was given an opportunity to honor the agreement before declaring a default or commencing litigation.
Simply asking for “help” may not be enough. The merchant should expressly request a reconciliation under the agreement, provide the required records, and preserve proof of the request.
Sample Reconciliation Request
Subject: Formal Request for Reconciliation and Adjustment of Withdrawals
Dear [Funder’s Name]:
I am writing on behalf of [Merchant’s Legal Name] to formally request a reconciliation under the terms of our merchant cash advance agreement dated [Agreement Date].
The business’s actual receivables have declined, and the current daily or weekly withdrawal of $[Current Withdrawal] no longer reflects the percentage of actual receivables specified in the agreement.
Accordingly, I request that you:
- Reconcile the account based on the business’s actual receivables;
- Adjust the withdrawal amount so that it corresponds to the agreed percentage of actual receivables; and
- Provide temporary financial assistance, if necessary, through reduced withdrawals or a temporary payment pause while the business’s revenue recovers.
In support of this request, I am providing the following documents:
- Recent business bank statements;
- Merchant-processing statements;
- Sales or receivables reports; and
- [Identify any other documents required by the agreement].
This request is not a refusal to comply with the agreement. The business intends to comply with its contractual obligations and is asking that the withdrawals be reconciled and adjusted in accordance with its actual receivables and the terms of the agreement.
Please confirm receipt of this request in writing. If you require any additional documentation to complete the reconciliation, please identify it specifically so that I can provide it promptly. Please also provide any proposed modification, reduced-payment arrangement, or other response in writing.
Sincerely,
[Merchant Owner’s Name]
[Merchant’s Legal Name]
[Telephone Number]
[Email Address]
[Agreement or Account Number]
Practical Steps for Protecting the Record
Before submitting the request, review the agreement carefully. Reconciliation provisions vary considerably and may impose specific requirements concerning timing, notice, supporting documents, and the method of submission.
The merchant should:
- Send the request to every email address or online portal identified in the agreement.
- Use the words “formal request for reconciliation.”
- Attach complete, accurate, and readable financial records.
- Request written confirmation that the submission was received.
- Save the sent email, attachments, delivery confirmations, and every response.
- Follow up in writing if the funder does not respond.
- Keep a record of telephone conversations, including the date, participants, and substance of each call.
- Avoid agreeing to a modification or settlement over the telephone.
- Have counsel review any proposed modification, confession, guaranty, settlement, or payment plan before signing it.
If the funder claims that the submission is incomplete, ask it to identify the missing information in writing and provide that information promptly if the request is reasonable and consistent with the agreement.
Reconciliation Is Not Merely a Litigation Argument
A reconciliation provision is supposed to function while the agreement is being performed. The merchant should invoke it when revenue declines—not wait until after a lawsuit has already been filed.
Making a timely request gives the funder an opportunity to comply with the agreement. If the funder refuses, ignores the request, demands information not required by the agreement, or declares a default without meaningfully addressing it, the written record may later become relevant to determining whether the funder breached the agreement.
A reconciliation request does not automatically create a defense or counterclaim, and every case depends on the precise contract language, the merchant’s compliance, and the funder’s response. Nevertheless, documenting the request before litigation can preserve important facts and substantially strengthen the merchant’s position if a dispute develops.
This sample is provided for general informational purposes only and is not legal advice. Merchant cash advance agreements differ, and the request should be tailored to the notice and reconciliation requirements of the specific agreement.
