Merchant Cash Advances (MCAs) — They’ll crush your business, they’ll drain your bank, and they’ll rob your future. They pretend to help, but they only hurt. But you can stop them, I’ve done it before, I’ll show you how attorneys will win — they will win. You see, MCAs hide behind fake factoring agreements, but they don’t behave like them. The law knows it. The courts know it. That’s why attorneys dig in with the law on their side — and start breaking these contracts down bit by bit.
When you take on an MCA, you’re not signing up for a real factoring deal. Real factoring adjusts based on your receivables. But fixed daily payments? No room to breathe? That’s not factoring. That’s a loan with a nice bow on top — I’ve seen it again and again. In Kapitus v. Suburban Waste, the fixed payments were a red flag — the court knew this wasn’t about future receivables. It was about guaranteed daily money — that’s a loan, no matter how it’s dressed up.
How Reconciliation Provisions Break Down MCAs
It’s not just the payments — it’s the lack of reconciliation. It’s the fact that there’s no adjustment if sales dip. Vague promises aren’t upheld in court. Reconciliation matters, and reconciliation isn’t optional. Courts have struck down agreements that didn’t offer clear, structured reconciliation. LG Funding v. United Senior proved that MCAs hide behind vague terms. Reconciliation missing? That’s how you fight.
You don’t have to forfeit your right to reconciliation if you forget to send bank statements — that’s not how real factoring works. Real factoring adjusts based on real receivables, reflecting your business’s realities. Bankruptcy? They can’t rush after your personal guarantees. That’s when attorneys show that factoring agreements assume risk, and MCAs don’t want risk — they just want their loan repaid.
The Power of State Laws Against MCAs
New York’s Article 9 — it says risk must transfer in a true factoring deal. But when MCAs demand guarantees and immediate judgments, they aren’t taking on risk, they’re locking you into a loan. California’s usury laws, New York’s usury laws, Texas’s usury laws — these states cap interest rates, and when MCAs pretend to be sales but act like loans, attorneys bring the case. It’s illegal. Illegal means we win.
Usury caps matter. In Georgia, any loan charging more than 16% is usurious. That’s how you beat MCAs. They’re charging more than 16%? We tear down that contract in court.
Partial Wins: A Lifeline for Business Owners
I’ve seen business owners win. You don’t have to get the entire debt wiped. Sometimes just reducing the payments or extending the term is enough. Partial wins matter. Partial wins save businesses. Fixed payments crush you, but reducing them saves you. I’ve seen daily payments recalculated based on real receivables, and I’ve seen businesses survive because of that partial win.
In Davis v. Richmond Capital, the fixed daily payments were attacked, and the court agreed — factoring should be based on real receivables. Daily payments should change. That’s what a real sale of receivables looks like — not fixed, fluctuating. Loan or factoring? Bankruptcy recourse? Fixed daily payments? No reconciliation? These all point to loans, loans under disguise. And you need an attorney who knows how to tear these contracts apart because it’s your livelihood at stake.
The case of Kapitus Servicing, Inc. v. Suburban Waste Services, Inc. is a crucial win—a crucial win for businesses, a crucial win for those trapped by MCAs, a crucial win for those needing a legal escape route. The court saw the truth—a loan, not a sale. The court ruled against the agreement’s so-called reconciliation clause—no process, no steps, no way for the business to adjust payments. If there’s no way to adjust, if there’s no way to reconcile, if there’s no way forward—it’s a loan!
Lack of a Proper Reconciliation Provision
A true factoring agreement provides clear reconciliation. A true factoring agreement gives specific instructions. A true factoring agreement allows adjustments. But here? No clear reconciliation, no adjustments, no fairness—just a loan in disguise.
- A true factoring deal fluctuates.
- It changes.
- It adapts.
- But a loan? It stays fixed.
- Day after day, payment after payment, regardless of actual receivables—this agreement was stuck in a loan’s rhythm.
Fixed Daily Payments
Factoring payments should change. Factoring payments should adapt. Factoring payments should follow the business’s flow. But here? The payments stayed the same, stayed fixed, stayed rigid—just like a loan.
Recourse in Bankruptcy
If the buyer takes on the risk—if the buyer absorbs the risk—if the buyer handles the risk of non-payment, it’s factoring. But this agreement? This agreement let Kapitus enforce personal guarantees the moment bankruptcy hit. A loan. When bankruptcy leads to immediate action—immediate judgment—immediate enforcement, it’s not factoring. It’s a loan, and the court saw right through it. Factoring means risk; a loan means recourse. This agreement was no sale.
Finite Term and Other Loan Indicators
Yes, the agreement had a finite term—a term defined, a term locked, a term clear. But a finite term does not a factoring deal make. Fixed payments. Bankruptcy recourse. These were the final blows. A term can be finite, but a loan is a loan. A term can be defined, but a loan is a loan. A term can be written, but a loan is a loan. The other factors outweighed any pretense of factoring.
Fixed Payment Calculation
The payments stayed the same—$1,477.00 daily, $603.00 daily. No fluctuation. No variation. No explanation for how these numbers were decided. A true factoring deal adjusts, but this? This was as rigid as a loan. If payments stay the same, if payments never change, if payments never follow the business’s actual receivables—it’s a loan. The court knew it. The court saw it. The court ruled it.
Conclusion: The Court’s Decision
In the end, the court declared it—a loan. No reconciliation, no variable payments, no assumption of risk. This was a loan masquerading as something else, and the court tore away the disguise. A win for businesses. A win for justice. This case is a beacon—a beacon for MCA defense lawyers, a beacon for businesses struggling with MCA terms, a beacon for justice. Lack of reconciliation? Fixed payments? Recourse in bankruptcy? These are the signs of a loan. Use them. Fight back.
