Frequently asked questions

A merchant cash advance is documented as the purchase of a portion of a business's future receivables at a discount, rather than as a loan. The funder advances a lump sum and collects a fixed daily or weekly remittance, or a stated percentage of receipts, until a specified total is delivered.

The structure is deliberate: characterized as a purchase rather than a loan, the transaction sits outside usury limits and outside most lending regulation. Whether a particular agreement actually is a purchase is a legal question that New York courts answer by looking past the label.

Sometimes, and it is often the whole case. Under LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 A.D.3d 664 (2d Dep't 2020), New York courts weigh whether there is a genuine reconciliation provision, whether the term is finite, and whether the merchant's bankruptcy is an event of default.

If the substance is a loan, the rate matters: Penal Law § 190.40 makes a loan above 25% per annum criminal usury, and Adar Bays, LLC v. GeneSys ID, Inc., 37 N.Y.3d 320 (2021), holds that a criminally usurious loan is void. More on reclassification.

A factor rate is a multiplier: advance $50,000 at a 1.40 factor and you owe $70,000. It is not an interest rate and it deliberately does not disclose the cost of money over time. A $20,000 cost on $50,000 repaid over six months is a very different annualized cost than the same $20,000 repaid over three years, and the factor rate conceals that difference.

New York's Commercial Finance Disclosure Law (Financial Services Law art. 8) requires specified disclosures, including an annual percentage rate, for covered commercial financing transactions, with implementing regulations from the Department of Financial Services. Whether a given transaction is covered depends on its date, size and structure.

It is the clause that is supposed to make an MCA a purchase rather than a loan. If the funder is truly buying a percentage of receipts, then when receipts fall the remittance should fall with them. That adjustment is reconciliation.

In practice these clauses are frequently drafted so that reconciliation is discretionary, or conditioned on notice requirements and documentation no merchant reliably satisfies, or simply never honored. A reconciliation right that exists on paper and never in fact is the pressure point in reclassification. If you asked for reconciliation in writing and were refused or ignored, that email is one of the most valuable documents in your file.

You signed a confession of judgment. Under CPLR 3218 the funder files your signed affidavit with a county clerk, together with an affidavit of the amount due, and the clerk enters judgment ministerially: no complaint, no summons, no judge. Full page on confessions of judgment.

Not since 2019. Chapter 281 of the Laws of 2019 amended CPLR 3218 to require the affidavit to identify the defendant's county of residence, to confine filing to that county, and to bar entry against a defendant who did not reside in New York when the affidavit was executed. Before the amendment, a great many MCA judgments were entered against out-of-state merchants in counties chosen for the funder's convenience.

Because it cannot. A restraining notice under CPLR 5222 legally obliges the bank to hold the funds, and the bank has no authority to assess whether the judgment is valid. Release comes from the creditor's consent or a court order. Full page on restrained accounts.

Up to twice the amount of the judgment. CPLR 5222(b) reaches any property in which the judgment debtor has an interest, up to that ceiling. The notice is effective for one year from service and can be served again.

It is a written discovery device under CPLR 5224 that a judgment creditor serves to locate assets. It can go to you, to your bank or to your customers. Yes, you have to answer it, within the period stated, and failure to respond is separately sanctionable even if the underlying judgment is later vacated. Answer it with counsel; the answers get used.

Yes. CPLR 5227 permits a proceeding against a person who owes a debt to the judgment debtor, which reaches receivables and, in practice, processors and customers. Commercially this is often more damaging than the restraint itself, because your customers learn about the judgment.

A UCC-1 is a financing statement filed with a filing office (in New York, the Department of State) to perfect a security interest. The funder files it on its own and nobody verifies it. Under UCC § 9-509 it is only effective if you authorized it, which generally means you authenticated a security agreement covering the described collateral.

Serve an authenticated demand for a termination statement. Under UCC § 9-513(c) the secured party then has 20 days, and UCC § 9-625 supplies actual damages plus a $500 statutory penalty per failure if it does not comply. Full page on UCC lien removal.

Then the filing is overbroad and, to the extent it exceeds your authorization, ineffective under UCC §§ 9-509 and 9-510. It is one of the easier defects to prove, because it is a document-to-document comparison.

Under CPLR 320(a): 20 days if the summons was personally delivered to you inside New York, 30 days if service was made any other way. Which applies depends on the facts of service, so send us the affidavit of service rather than estimating.

Likely a motion for summary judgment in lieu of complaint under CPLR 3213, which funders use on guaranties. Your response time is set by the motion papers and is often shorter than the ordinary appearance period. Treat it as urgent. Full page on guaranty defense.

Not necessarily. Many MCA guaranties guarantee the merchant's performance of specified obligations rather than repayment of the advance. If receipts declined and the merchant remitted its stated percentage, that is performance, not breach, and a performance guaranty is not engaged without a breach.

Sometimes it is the right answer and sometimes it is an expensive way to avoid a defensible case. Two specific points: many MCA agreements make the merchant's bankruptcy an event of default, which is itself one of the LG Funding factors weighing toward reclassification as a loan; and a personal guaranty is not resolved by the business's filing. This firm does not file consumer or business bankruptcy petitions. If that is where the analysis goes, we will say so and refer you to counsel who does.

You can, and merchants sometimes do it well. Two cautions. First, anything you say about your receipts, your other advances or your assets gets used, and collection staff are trained to gather exactly that. Second, an unrepresented settlement often gets papered with a fresh confession of judgment or a new guaranty, which leaves you worse off than before. Have someone read whatever they send you before you sign it.

No, and separate engagements are usually the more expensive route. Stacked agreements share drafting and share defects, the UCC filings overlap, and a global resolution is available only to a lawyer holding all the files.

Flat fee where the scope can be honestly defined: a motion to vacate, an answer with counterclaims, a UCC termination campaign. Hourly where it cannot, which usually means contested litigation with discovery. The number and its scope are in the engagement letter before you commit, and the review that produces the number is free.

The funding agreement and any addenda; any confession of judgment you signed; whatever you were served with, including the envelope or affidavit of service; any restraining notice, information subpoena or levy; bank statements covering the funding period and the remittance history; and any written reconciliation request and the response. If you do not have all of it, send what you have.

We treat it as confidential, but you are not a client yet. Communications made to seek legal advice are generally privileged. But no attorney-client relationship exists until an engagement letter is signed by both sides. Until then, do not send material you would be harmed by disclosing, and be aware that a conflicts check may prevent us from taking the matter at all.

Same day, when it is an emergency. A restrained operating account, an answer deadline inside 48 hours or an imminent levy is triaged the day it comes in, and an order to show cause can be drafted and e-filed through NYSCEF the day the facts are in hand. What we cannot control is a judge's calendar, and no honest lawyer will promise you a decision date.

Yes. Mr. Usher speaks both and works with clients directly, without an interpreter. Да, по-русски. Sí, en español.