A merchant whose revenue falls should first invoke the reconciliation provision, which adjusts the remittance to the agreed percentage of actual receipts. Where payments simply stop, the funder moves to collection, may enforce a UCC lien and will pursue the personal guarantee — and stacking or diverting receipts to another account typically converts a shortfall into a breach with far worse consequences.
Brokers should understand this even though it happens after their involvement ends, because what you tell a merchant during the sale determines what they do when revenue drops — and the difference between reconciliation and default is often just knowing the provision exists.
A genuine purchase of receivables carries the right to reconcile: if receipts fall, the remittance is adjusted so it stays the agreed percentage rather than a fixed sum. Merchants routinely do not know this and stop paying instead, which turns a manageable adjustment into a breach. Telling them the provision exists at signing costs a sentence.
| Situation | What follows |
|---|---|
| Revenue falls, merchant requests reconciliation | Remittance adjusted; not a default |
| Payments stop without contact | Default, then collection |
| Receipts moved to another bank account | Treated as a breach, and worse than a shortfall |
| New position taken in breach of the agreement | Can accelerate the whole balance |
| Business closes genuinely | Personal guarantee pursued, UCC enforced |
Most funders would rather restructure than litigate, which is why the merchant who calls before missing payments generally gets a different outcome from the one who goes quiet.
They should invoke the reconciliation provision, which adjusts the remittance to the agreed share of actual receipts. Stopping payment without contact is a default and leads to collection instead.
The right to have the daily or weekly remittance adjusted when revenue falls, so it remains a percentage of receipts rather than a fixed amount. Merchants routinely do not know it exists.
Enforce the UCC lien against business assets, pursue the personal guarantee, contact the payment processor and litigate. Most would rather restructure than litigate if the merchant makes contact.
Because it is treated as a deliberate breach rather than a shortfall. It is the fact pattern funders pursue hardest and it usually ends any prospect of a negotiated outcome.
Explain reconciliation, at least. A merchant who knows the provision exists calls when revenue drops instead of going quiet, and that single sentence at signing changes the outcome.
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