Key points
- A funder’s leverage is the daily debit and the COJ. Yours is the reconciliation clause and the fact that collecting from a failed business costs more than settling.
- Settlement firms can pause debits, invoke reconciliation and negotiate each position down, typically to 35% to 70% of balance.
- They cannot make a filed judgment disappear, stop a funder from suing, or guarantee a percentage. Anyone who says otherwise is selling.
How a stack actually works
The first advance covered a slow month. The second covered the first. By the third, the combined daily debits exceed the average daily deposit, and the account goes negative by the second week of every month. This is not a failure of discipline; it is arithmetic. Three positions at 1.3 factors over five-month terms pull roughly 1.2% of the original principal out of the account every business day.
Each funder filed a UCC-1 at funding. Each contract selects New York law. At least one probably contains a confession of judgment. That is the position a relief firm inherits when you call.
“The reconciliation clause is the most valuable sentence in the contract, and the one funders hope you never read.”
Alana Reyes, Esq., Zogby legal reviewer
What a firm can do
Three things, in order. First, stop the bleeding: invoke reconciliation in writing so payments track actual revenue, or negotiate a pause while talks proceed. Verified owners reported this in two to four weeks with the best firms. Second, negotiate each position separately, using the funder’s own math: a settled 50% today is worth more to them than an uncertain judgment against a business that may not exist next year. Third, clean up: UCC terminations, judgment satisfactions, written release of the guarantee.
What a firm cannot do
It cannot stop a funder from filing suit; it can only make settlement more attractive than suing. It cannot appear in court for you unless it is a law firm, which most are not. It cannot erase a judgment already entered; that requires a motion to vacate by counsel, on grounds like defective service or improper COJ entry. And it cannot guarantee a percentage. Every funder, contract and revenue picture is different, and a firm that promises “50% guaranteed” is describing its marketing, not its results.
Key takeaway
Hire a firm for the three things it can do, and hire a lawyer, through the firm or on your own, the moment a lawsuit or judgment appears. Pay nothing until the first settlement closes.
What to ask before you sign
- When is your first fee charged, and what triggers it?
- Are you a law firm? If not, who handles litigation and who pays for it?
- Show me a redacted settlement letter from the last 90 days.
- How do you stop the debits, and how long did it take for your last ten clients?
- What is your program completion rate?
General information, not legal or financial advice. Statistics are from Zogby’s 2026 owner interviews; see State of MCA Debt 2026.
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