9 Terms in Your Blue Bridge Capital LLC Agreement That Matter Once Suit Is Filed

A suit over a Blue Bridge Capital LLC agreement, like most MCA lawsuits, names your business as the defaulting borrower and wants the full balance plus fees and charges. Often it names you individually, too, as a guarantor. But it is not automatically right. Every suit, no matter how big and scary the funder looks, is built on the terms of its contract. To get anything from you, the company first has to prove those terms. Look first at the terms that decide if you’ve actually defaulted, the ones that set what you owe, and those that say if you’ll need to pay personally. Laws and defenses differ from one state to another.

1. The events of default

Most MCA contracts have a clause called “Events of Default,” “Default” or something like that. This part lays out when you’re not living up to the contract and what happens if you don’t. It often lets the funder demand the balance right away, add fees on top of the balance, and pursue the guarantor. But those powers don’t always kick in. The funder has to show that something in the contract qualifies. So you’ll want to look at what it says you did. The question isn’t limited to the default clause itself, though. A judge will still ask what obligation of yours the funder says you violated. A single returned payment may not get there by itself.

2. The specific acts listed

Events of Default clauses usually list specific breaches. They often say you’re in default if you do things like blocking or stopping ACH debits, changing or closing the debited bank account, switching card processors without permission, or selling or closing the business. They may say your whole balance is due if you gave wrong info on the application or didn’t provide bank statements. The complaint itself may name the one or more of these things that your business is said to have done. But it still has to show your contract says that particular act triggers default. Look at the exact wording and compare the complaint and the contract to each other.

3. The reconciliation clause

Daily debits are meant to track a share of sales. So when sales slow down, the contract may call for a recalculation. But one or both sides can miss steps in that. And that matters. Pay attention to who has the obligation to come up with the correct balance. Is it the funder, or your business? Make sure to see what the contract says. Who asked to do it, and who actually did it? Sometimes a funder continues taking debits without adjusting. Take good notes of conversations where adjustments or corrections came up.

4. The ordinary-slowdown clause

Many agreements say your business isn’t in default if sales just slow down. If this situation sounds familiar to you, look at what the contract says about the subject. Your case will turn on what the contract says and how a court decides it applies to the facts.

5. The terms that make it a loan

MCA funders say their deals are not loans and not subject to laws that apply to other debt. Some judges buy that, some don’t. In a lawsuit, both sides will point to certain features of their agreement. In New York, courts look at three. One is whether there’s a real reconciliation provision. Another is whether the deal has a finite term. The third is whether the funder has recourse if you file bankruptcy. If the judge finds it is a loan and the rate is over New York’s 25% criminal limit, then it declares the whole deal void. It is only a possibility.

6. The purchase price you received

If your business didn’t get its advertised advance, it needs to come up in the lawsuit. So be ready to show how much you got, to compare with the lawsuit. But since MCA contracts are not all the same, you’ll need to look at the facts and the wording.

7. The fee and attorney-fee clauses

Some agreements call for you to pay an extra fee if you default. So-called “attorney fees” in MCA complaints often equal a fixed percentage of the amount sued for. Check the rate against the terms, and keep looking at the numbers. The courts don’t like penalties very much.

8. The personal guarantee

Many MCA contracts call for business owners to sign a personal guarantee. The company can name that person along with the business in its lawsuit. The claims, though, have limits. For some agreements, only certain defaults trigger a personal guarantee. And some terms aren’t that clear. Do the lawsuit and the contract agree on which actions of the business trigger the guarantee? What you want to do is pay attention to how the lawsuit follows the wording of the guarantee. When the company’s actual claims don’t seem to fit that description, you have a chance to argue back. If the main contract falls short of the legal standard, so may the guaranty.

9. The confession of judgment

You may have signed a confession of judgment. But that doesn’t end the matter. Judgments can be attacked. Courts can’t reach beyond their territories. The rules vary. If the judgment wasn’t filed in the county of the debtor’s residence, it may be open to challenge. New York, for one, stopped allowing them in 2019 against out-of-state debtors with no place of business there.

Do not delay. In New York state court you often have only 20 to 30 days to reply, and it takes time to figure these things out. Don’t let the judgment be taken against you without answering. One thing you may need is your original contract. Make a list of all the payments you made, how much money your business got, and every bank statement showing the debits. It’s easy to take a step without knowing the legal meaning of it. Get a lawyer’s advice, for your business and for you.

A free contract review costs nothing and takes a day or two. Call (888) 837-7053, or send the agreements to Delancey Street for a straight read on your options.