What is a reconciliation clause in a merchant cash advance?

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It is your right to have the remittance adjusted when sales fall, so the funder collects a true share of actual receivables rather than a fixed payment. It is the clause that makes an advance an advance rather than a loan, and it is the one most worth reading before signing. Because the funder buys a percentage of future sales, the amount collected should move with those sales. In practice most agreements set a fixed daily or weekly debit estimated from historical deposits, then provide reconciliation as the correction mechanism: if actual receipts come in lower, the business can request the debit be recalculated and the difference credited. What matters is whether that right is genuine and practically exercisable. A clause requiring notice within an impossibly short window, or granting reconciliation entirely at the funder's discretion, or demanding documentation no operating business could assemble in time, is a right on paper only. Courts examining whether an advance is really a loan look closely at exactly this, and a 2026 US decision turned on a reconciliation right that could not be used in practice. Before signing, establish three things: how a request is made and to whom, how quickly the funder must respond, and what evidence is required. If nobody can answer plainly, treat that as information about the funder. And be direct with anyone claiming payments simply 'adjust with your sales' — that is only true where a usable reconciliation right exists.

Merchant Cash Advance (MCA)	Unsecured
Business Line of Credit	Often unsecured
Invoice Factoring	A/R is the collateral
Equipment Financing	The equipment
Bridge Loan	Usually asset-backed
Term Loan	Sometimes
Inventory Financing	First charge on inventory + PG
Acquisition Financing	Target assets + PG

What is a reconciliation clause in a merchant cash advance?

What secures each product

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