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Stop payment
Also called stop pay, ACH stop, blocking a debit.
An instruction to your bank not to honour a specific debit or series of debits — distinct from revoking the underlying authorisation, and in a funding agreement almost always an event of default.
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What it means
Two separate acts are involved and people conflate them. A stop payment tells your bank to reject an entry when it arrives. Revoking the authorisation tells the originator to stop sending them. Doing one without the other leaves the problem half-solved, and doing either is usually a breach of the funding agreement.
The mechanics
Banks require the instruction before the debit arrives — typically at least three business days for an ACH entry — often in writing, and usually for a fee charged per stop or per series. A stopped entry returns to the originator with a code such as R08, so the funder knows within a day.
Business accounts are not consumer accounts
Consumer ACH carries specific revocation and re-credit rights on a defined timetable. Business entries do not. Your position comes from the deposit agreement, UCC Article 4A and the contract, and the window for returning an unauthorised business debit is measured in a day or two rather than in weeks. Read your deposit agreement for the actual deadlines before you need them.
Better tools for a specific problem
An ACH block or filter instructs the bank to reject entries from a named originator by company ID, which is more durable than a single stop. A debit block on the account rejects everything, which breaks every other supplier you pay that way. Closing the account works and creates a month of chaos with every legitimate debit and deposit you have set up.
Where this one catches people
Stopping a funder's daily debit is an event of default in essentially every advance agreement, and it is usually one of the specific triggers written into the performance guarantee — the very exception that converts a limited guarantee into personal liability for the full remaining balance.
The sequence after a stop is fast: the entry returns, the funder accelerates the entire remaining purchased amount, files or enforces its UCC, pursues the guarantor personally, and in some agreements contacts your processor or your account debtors. You have handed over the default it needed, on a date of your choosing, with a paper trail showing intent.
If the business genuinely cannot fund the debit, the order that leaves you least exposed is: contact the funder before the debit date, request reconciliation in the exact form the contract specifies with the documents it requires, and get any forbearance or reduced-payment arrangement in writing signed by someone with authority. That may fail. It still beats stopping the debit and negotiating afterwards.
Where you will meet this term
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Stop payment — common questions
What does stop payment mean?
An instruction to your bank not to honour a specific debit or series of debits — distinct from revoking the underlying authorisation, and in a funding agreement almost always an event of default.
Where does stop payment catch people out?
Stopping a funder's daily debit is an event of default in essentially every advance agreement, and it is usually one of the specific triggers written into the performance guarantee — the very exception that converts a limited guarantee into personal liability for the full remaining balance.
Is stop payment the same as an interest rate?
Stop payment 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 stop payment apply to?
Merchant Cash Advance, Working Capital, Term Loan, Revenue-Based Financing.
Is there a worked example of stop payment?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside stop payment?
ACH, ACH authorization, ACH debit, Acceleration clause, Default.
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.