Sued by a Merchant Cash Advance Company in New York?

Most merchant cash advance agreements send disputes to New York courts. If your business is being sued here over an MCA, you need a New York lawyer who is in these courtrooms.

Discuss Your Case

Why You Were Sued in New York.

Merchant cash advance agreements usually choose New York law and New York courts, so funders file in New York Supreme Court even when the business is in Texas, Florida, or anywhere else. Many of these cases are filed in Kings County and Nassau County. The suit typically names the business and every owner who signed a personal guarantee.

Your business does not need to be in New York for me to defend it here. Out-of-state businesses are a large share of the defendants in these cases.

The Deadline.

A defendant generally has 20 or 30 days to respond, depending on how it was served. A business served outside New York generally has 30 days after service is complete. If nobody answers, the funder can seek a default judgment against the business and the guarantors. My guide for businesses sued in New York explains the deadline, and if a judgment has already been entered, see vacating a default judgment.

Defenses New York Courts Recognize.

Is it really a loan?

A merchant cash advance is supposed to be a purchase of future receivables, not a loan. If it is really a loan, New York's usury laws can apply. Courts look at whether the agreement has a working reconciliation provision, whether it has a finite term, and whether the funder has recourse if the merchant goes bankrupt. LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 A.D.3d 664, 666 (2d Dept 2020). Charging interest above 25 percent a year on a loan is criminal usury under Penal Law 190.40, and New York's highest court held in Adar Bays, LLC v. GeneSYS ID, Inc., 37 N.Y.3d 320, 325-26 (2021), that a corporation can raise criminal usury as a defense and that a criminally usurious loan is void.

Confessions of judgment.

Many agreements include a confession of judgment. Under CPLR 3218(b), a confession can be filed only with the clerk of the county where the defendant resided when it signed or resides when the confession is filed, and a business resides where it has a place of business. A business with no place of business in New York therefore generally cannot have a confession of judgment entered against it in a New York court.

The numbers and the default.

Did a default actually occur under the agreement's terms? Did the funder honor reconciliation requests? Are fees and charges counted twice? These questions are often where a case turns.

Notices to your customers.

Funders often send notices to customers or payment processors demanding that payments go to the funder. Those notices can be challenged, and the timing matters.

What Usually Happens.

Many merchant cash advance cases end in a negotiated resolution. The strength of the defenses decides the terms, and a business that answers on time, with defenses on the record, negotiates from a very different position than one facing a default. I make no promises about outcomes. I will tell you plainly what your defenses are worth.

Frequently Asked Questions

Why was my business sued in New York if we are located in another state?

Most merchant cash advance agreements choose New York law and New York courts, so funders file in New York Supreme Court regardless of where the business operates.

Is a merchant cash advance a loan under New York law?

It depends on the agreement. Courts look at whether there is a working reconciliation provision, whether the agreement has a finite term, and whether the funder has recourse if the merchant files for bankruptcy. If it is really a loan, usury defenses can apply.

Can an MCA company enter a confession of judgment against my out-of-state business in New York?

Under CPLR 3218(b), a confession of judgment can be filed only in the county where the defendant resided when it signed or resides at filing, and a business resides where it has a place of business. A business with no place of business in New York generally cannot have one entered in New York.

Am I personally liable if I signed a personal guarantee on the MCA?

The funder will usually sue the guarantor along with the business. The guarantee's terms decide the scope of your exposure, and the defenses available to the business can matter to the guarantor too.

Why the Courtroom Matters.

I have practiced in New York for 28 years, and my office is in New York Supreme Court every week, including Kings County and Nassau County, where many of these cases are heard. I know how the parts run and what the judges expect, and that shapes every paper and every conversation about settlement from the first day.

When you contact me, I run a conflict check first. If I can take the case, I will tell you plainly where things stand, what the deadlines are, and what it will take.