5 Contract Clauses Your MCA Funder Hopes You Never Read

The Agreement You Signed in Twenty Minutes

The MCA agreement was designed to be signed quickly. The broker presented it as standard. The pages were numerous. The font was small. The funding was urgent. You signed. The funder was counting on exactly this sequence, because the agreement contains clauses that, if read and understood, would have altered the negotiation, the decision, or both. It is too late to not sign. It is not too late to read.

The Confession of Judgment Clause

The first clause is the one that eliminates your right to defend yourself in court before a judgment is entered against you. A confession of judgment is a pre‑signed affidavit authorizing the funder to obtain a court judgment without filing a lawsuit, without serving you, and without a hearing. In states where this mechanism is permitted, the funder files the affidavit with the county clerk, and the judgment appears on your record. Your bank accounts can be frozen. Liens can be placed on your property. The funder hopes you did not read this clause because, if you had, you might have asked why a standard commercial transaction requires you to waive your right to a trial.

That question does not have a comfortable answer.

The Personal Guarantee

The second clause extends the business obligation to you as an individual. The personal guarantee means that if the business cannot pay, you can. Your home, your savings, your personal bank accounts: all become reachable by a judgment creditor. The guarantee was likely on a separate page, or embedded in a section titled something neutral. The funder hopes you did not read it because the guarantee is the mechanism by which a business debt becomes a personal crisis. Without it, the funder’s recourse is limited to business assets. With it, the funder’s recourse includes everything you own.

The Waiver of Jury Trial

The third clause is procedural and consequential. Many MCA agreements include a waiver of the right to a jury trial. If the dispute reaches court, the case will be decided by a judge, not a jury. Funders prefer this arrangement for a reason: judges in commercial courts see MCA disputes regularly and may view them as routine contract enforcement. Juries, by contrast, are composed of ordinary people who may react with less detachment to the mechanics of a product that charges effective interest rates exceeding one hundred percent on small businesses. The waiver of jury trial removes the funder’s exposure to a jury’s sense of fairness.

The Forum Selection Clause

The fourth clause determines where disputes are litigated. Most MCA agreements designate New York as the exclusive forum for any legal proceeding. If you are a business owner in Texas, Florida, or California, this clause requires you to litigate (or defend) in New York, at New York expense, before a New York court. The practical effect is to increase the cost and difficulty of contesting the funder’s claims. The funder’s attorneys are in New York. Their office is near the courthouse. Yours is not. The forum selection clause is the geographical expression of an imbalance the funder intends to maintain.

Forum selection clauses are not invincible. Courts have declined to enforce them where the clause is unconscionable, where the chosen forum has no meaningful connection to the transaction, or where enforcing it would effectively deny the borrower access to justice. But challenging the clause requires legal action, and legal action requires awareness that the clause exists.

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The Prohibition on Class Action

The fifth clause prevents you from joining with other borrowers who signed similar agreements and experienced similar practices. A class action waiver ensures that every dispute is individual, every borrower bears the full cost of litigation alone, and the funder never faces the accumulated claims of hundreds or thousands of borrowers in a single proceeding. The economics of this clause are transparent: an individual claim against an MCA funder may not justify the cost of litigation. A class action aggregating thousands of claims might produce a judgment that threatens the funder’s business model. The waiver exists to prevent the second scenario.

These five clauses are not hidden. They are in the document you signed. But they were designed to be overlooked, and the design has been, for most borrowers, effective. Reading them now does not undo the signature. It does inform the strategy for addressing the debt they created, because each of these clauses has been challenged, and each has, in certain circumstances, been found unenforceable.

An attorney can tell you which circumstances apply to yours.