MCA Debt Glossary — Definitions for Business Owners
MCA Debt Glossary
Brokers and lenders use jargon to obscure what’s actually happening. Here are the terms that matter, explained plainly. If you’re considering an MCA, currently in the trap, or working with BDA to settle, this is your reference.
Factor Rate
What MCA lenders use instead of APR. Looks small (1.40, 1.49). Translates to 40-49% interest with no legal cap. Designed to obscure true cost.
ACH (in MCA context)
Automated Clearing House, the daily withdrawal mechanism MCA lenders use. They pull from your business bank account every business day, which is why it drains cash flow faster than monthly loan payments.
Stacked MCAs
Two or more merchant cash advances active at the same time. The “stack” happens because each MCA’s daily ACH eats the cash flow that was supposed to pay the previous one. Average stack at BDA enrollment: 3-5 advances.
COJ (Confession of Judgment)
A clause in most MCA contracts that waives your right to defend against the lender in court. Buried on page 7-8 of typical contracts. Most owners don’t know they signed it until it’s used.
UCC Filing (UCC-1)
Uniform Commercial Code filing. Placed on your business automatically when you sign an MCA contract. Alerts every traditional lender that you have “high-risk commercial transactions”, blocks conventional refinance.
ZBL Letter (Zero Balance Letter)
Document from a lender confirming an MCA balance has been resolved. BDA obtains these as part of the program. Submitted to Secretary of State to remove UCC filings.
Restructure (vs. Consolidation)
MCAs cannot be consolidated (they’re not loans). Restructuring means new contracts directly with each lender at reduced payments. BDA’s actual service.
Custodial Account
FDIC-insured account that holds your monthly payment until lenders are paid. BDA uses Reliant Account Management (RAM), clients have 24/7 access to track payments.
Daily ACH
The mechanism MCA lenders use to pull money from your account every business day. Strategically designed to drain cash flow before you can plan around it.
Factor Rate vs. APR
Factor rate × repayment ÷ funded amount = effective APR. A 1.40 factor rate over 12 months is approximately 80% APR. Lenders use factor rates because the math doesn’t disclose true cost the way APR does.
Personal Guarantee
A clause in most MCA contracts holding the business owner personally liable for the debt, meaning the lender can pursue your house, car, savings if the business defaults. Standard in MCA contracts.
Hardship Clause (BDA program)
The “skip a payment” feature unique to BDA. Bad week? Notify by Wednesday, skip that week’s payment. $19.95 fee from custodial account, no penalty.
Attorney Network
BDA’s legal partner network for clients facing lawsuits, COJ filings, or imminent legal action. Capability layer, not a separate service.
TSR Compliance (FTC Telemarketing Sales Rule)
Federal regulation prohibiting debt settlement companies from charging fees before settling at least one debt. BDA operates squarely inside TSR, performance-based fees, no upfront.
NSF Fees
Non-Sufficient Funds fees. When MCA daily ACH attempts hit an empty account, the bank charges $25-$35 per attempt. Stacked MCAs can generate $300-$500/week in NSF fees alone.
Reliant Account Management (RAM)
The FDIC-insured custodial account provider BDA uses. Client funds are held in client’s name, not BDA’s. Clients have 24/7 portal access to track every payment to lenders.
Forbearance
A temporary lender-granted pause on collection, not a settlement. Some funders offer it briefly. BDA negotiates structured settlements rather than relying on forbearance.
Lien Letter / Freeze
Notice from an MCA lender that they’re placing a lien on your business or attempting to freeze a bank account. Typically follows judgment via COJ. Requires immediate attorney coordination.
Term not on this list?
If a broker, lender, or contract used a word you don’t recognize, ask us. The 15-minute consultation is the fastest way to get a plain-English read on your specific situation.
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