Glossary · contract

True-up

Also called trueing up, adjustment, reconciliation adjustment.

An after-the-fact correction bringing an estimated amount into line with actual figures — refunding over-collection on an advance, or settling the difference between a reserve estimate and real collections.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

On a merchant cash advance the true-up is the output of reconciliation: the funder compares the fixed amounts collected over a period against the specified percentage of actual receipts, and either refunds the excess, credits it against the remaining purchased amount, or resets the going-forward debit. Which of those three happens is a contract question and they are not equivalent — a credit against the balance does nothing for a business that needs cash this week.

In factoring, the reserve is trued up when an invoice is collected: the factor releases the held-back portion less fees and any chargebacks. In asset-based lending, borrowing base certificates are trued up against actual collections and inventory counts, and an over-advance is called if the base has shrunk.

In each case the mechanism is the same shape: money moved on an estimate, then corrected against reality on a schedule.

Where this one catches people

A true-up expressed as a credit rather than a refund is often presented as though the merchant has received money back. It has not. The purchased amount is reduced, which shortens the deal at the far end; the daily debit continues unchanged. For a business whose problem is this month's cash, a credit is close to worthless. Check which form the contract provides.

Worked through

Illustrative only. Specified percentage 10 percent. Over a month the funder collected $12,000 in fixed daily debits. Actual receipts were $90,000, so the contracted share was $9,000. The true-up is $3,000. Refunded, that is $3,000 of cash. Credited against a remaining purchased amount of $60,000, it is $3,000 less to deliver eventually and nothing at all today.

Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.

Where you will meet this term

Merchant Cash Advance Invoice Financing Revenue-Based Financing Asset-Based Lending

Read next

Borrowing baseThe pool of eligible collateral, each class multiplied by its own advance rate and reduced by reserves, that … OveradvanceFunding beyond what the borrowing base formula supports, extended as a temporary and usually discretionary ac… ReconciliationComparing what the funder actually collected against the percentage of receipts it was entitled to, and adjus… ReserveThe portion of an invoice's face value a factor holds back at funding and releases, less fees, once the custo… Specified percentageThe share of a business's future receipts that a merchant cash advance agreement says has been purchased — th…

True-up — common questions

What does true-up mean?

An after-the-fact correction bringing an estimated amount into line with actual figures — refunding over-collection on an advance, or settling the difference between a reserve estimate and real collections.

Where does true-up catch people out?

A true-up expressed as a credit rather than a refund is often presented as though the merchant has received money back. It has not. The purchased amount is reduced, which shortens the deal at the far end; the daily debit continues unchanged. For a business whose problem is this month's cash, a credit is close to worthless. Check which form the contract provides.

Is true-up the same as an interest rate?

True-up is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does true-up apply to?

Merchant Cash Advance, Invoice Financing, Revenue-Based Financing, Asset-Based Lending.

Is there a worked example of true-up?

Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.

What else should I read alongside true-up?

Borrowing base, Overadvance, Reconciliation, Reserve, Specified percentage.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.