MCA Default Restructuring: Evaluating a Modified Payment Structure.
MCA restructuring is a potential resolution strategy that involves evaluating whether a different payment structure or workout may be available for an existing MCA obligation. Restructuring is not guaranteed, and not every business or situation will qualify. Understanding what restructuring involves can help you evaluate whether it may be worth considering alongside other resolution strategies.
What MCA Restructuring May Involve
Restructuring in the context of an MCA generally refers to evaluating whether the payment terms of an existing obligation may be modified. This may involve changing the payment frequency — for example, from daily to weekly — adjusting the payment amount, extending the term, or establishing a workout arrangement that differs from the original agreement.
Whether restructuring is available depends on the MCA provider’s willingness to modify the terms, the specific provisions of the agreement, the business’s payment history, and the circumstances of the default. No provider is obligated to restructure, and no particular modification is guaranteed. The provider’s decisions are outside any advisor’s control.
How Restructuring Differs From Settlement
Restructuring and settlement are distinct strategies. Restructuring typically involves modifying the payment structure of an existing obligation — the obligation continues, but the terms change. Settlement typically involves evaluating whether the obligation itself may be resolved through a negotiated resolution, potentially at a reduced amount or under different terms.
In some situations, restructuring may be more appropriate — for example, when the business can continue making payments but needs a different structure to do so sustainably. In other situations, settlement may be more appropriate — for example, when the business cannot continue the current payment trajectory and a negotiated resolution may be the better path. In some cases, both may be worth evaluating simultaneously.
What Restructuring Does Not Do
Restructuring does not eliminate the obligation. It does not stop a lawsuit that has already been filed. It does not remove a judgment or a UCC filing. It does not prevent a creditor from pursuing other remedies unless the creditor agrees as part of the restructuring — which is not guaranteed.
Restructuring also does not guarantee that the modified payment structure will be sustainable long-term. If the underlying financial pressures that made the original structure unsustainable are not addressed, a restructured payment may also become difficult to maintain over time. This is why evaluating the full financial picture — not just the MCA terms — is important.
No restructuring or payment modification is guaranteed. Qualification is required. MCA Default does not guarantee that any MCA provider will agree to restructure or modify any obligation.
Restructuring and Multiple MCA Positions
When multiple MCA positions are involved, restructuring may be more complex. Each position has its own agreement, and each creditor may respond differently to a request for modified terms. In some cases, restructuring one position while others continue under original terms may not provide sufficient relief. A broader evaluation of all positions may be necessary to identify whether restructuring — alone or in combination with settlement or qualified refinancing — may provide a viable path.
For businesses with multiple positions, it may be valuable to understand the total payment burden, the terms of each agreement, and how restructuring across several creditors might work in practice before pursuing any single conversation.
Evaluating Whether Restructuring May Be Appropriate
Restructuring may be worth evaluating when a business is experiencing payment pressure but may be able to continue making payments under a modified structure. It may also be worth evaluating alongside settlement when the situation is more complex or when multiple positions are involved.
The evaluation involves understanding the specific terms of each agreement, the business’s cash flow, the total payment burden, and whether a modified structure would be sustainable. It also involves understanding that no particular restructuring outcome can be promised, and that the creditor’s willingness to modify terms is never guaranteed.
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