9 Terms in Your Chrome Capital Agreement That Matter Once Suit Is Filed

If you ever get served, you should spend some time (it is important) scrutinizing your Chrome Capital funding agreement. Where the case is filed matters. What law the contract’s jurisdiction clause refers to does too. Don’t be fooled by labels. What decides where you stand when an MCA funder sues is what the contract terms say about where you can be sued and how fast you have to respond, the confession of judgment clause, the personal guaranty, whether the law of New York applies, the reconciliation requirement, the fixed payments, the bankruptcy default term, the ACH/day-to-day default term, and the UCC lien clause, not whether it is or isn’t called a loan.

1. Where you get sued

What ultimately counts in an MCA action is what the MCA funding agreement says about jurisdiction (where you can be sued) and venue (where you have to be sued). If you get sued in state court in New York, you have 20 days to respond if they serve you in person, or 30 days if service was some other way. If you miss that, the court can rule against you by default. Some motions, including one to vacate the default judgment, must be filed within 1 year after the plaintiff served notice of the entry of judgment. In Pennsylvania, the rules are a little different. You have 20 days to file an answer, and for a plaintiff to get a default judgment, they have to serve you with notice first that they’re going to ask for a default.

When a funder gets a judgment in New York, they can send a copy to Pennsylvania and file it with a county Prothonotary’s Office. Once the Prothonotary files it, it’s a lien. There’s no waiting period after the filing to start collection actions.

2. Confession of judgment

Whether the Chrome Capital funding agreement you’re looking at has a confession of judgment clause will decide what your options are when they sue you. The confession of judgment clause makes it so all the funder has to do is file some papers and they get a judgment with no lawsuit or hearing. New York won’t let funders use it against out-of-staters anymore, but Pennsylvania still does. In New York, a confessed judgment can only be filed in your county of residence, and only if you signed within the past 3 years.

With confessed judgment in Pennsylvania, you usually don’t know about it until it is entered, and it’s 30 days from when you get notice to file a petition to strike or open. A petition to strike is just a list of errors that the judge should see by looking at the documents on record. A petition to open needs something more to defend against the confession of judgment. Anything you don’t raise then, you can’t raise.

3. The personal guaranty

Whether the funding agreement has a personal guaranty will decide your personal liability. Often, the guaranty agreement has its own warrant of attorney for judgment. That way, the funder can get judgment against both the business and the owner at once. Guaranty of business debt isn’t consumer debt, so there goes one big protection. In Pennsylvania, jointly held property is usually safe unless both spouses signed the guaranty.

4. New York law

Many of these documents select New York law. That clause is made for the funder’s purposes, not yours. But it can be your best usury argument too. If you’re a corporation, you can’t raise civil usury, but you can argue criminal usury. Criminal usury is when the interest is over 25% a year. In Adar Bays (2021), New York’s highest court said that criminally usurious loans are void from the start. However, rates can’t be capped on loans of $2.5 million or more. But you still have to prove that the advance was a loan, not another kind of funding.

5. The reconciliation clause

In New York, the first thing courts weigh when deciding whether an MCA is a loan or a sale is whether it has a reconciliation clause. It decides if the funder can lower your daily draw when your sales go down. Some funders don’t honor the right. If the funder has the “sole discretion” to adjust payments, usury defenses get some help (LG Funding, 2020). A 2026 appeals court said Richmond Capital’s advances were loans, noting the promised reconciliations didn’t actually happen.

6. Fixed payments

How long the Chrome Capital funding agreement gives for paying it back matters. If you’re obligated to pay the amount you received back, in a fixed amount of time, a court is more likely to say it is a loan, because it has a maturity date. It’s less likely to find that an MCA is a loan if the length of the term depends on the merchant’s sales.

7. The bankruptcy default term

If the funding agreement lets the funder go after you no matter what, even if you close up or go bankrupt, a court may think it looks a lot more like a loan. That makes it less like something based on future sales and more like a flat amount you have to pay no matter what. LG Funding’s term saying it had the sole discretion to adjust payments plus terms making bankruptcy a default kept the usury defense alive.

8. ACH and default terms

If you shut down the bank account or put a stop on the ACH without a solid plan, you can wind up with a ton of problems. That usually triggers default. In Pennsylvania, a default can bring a confessed judgment, fast. Telling your bank that the authorized ACH debits were unauthorized can be seen as fraud. It can screw up your defenses. Don’t move funds around. If you’re using one company’s money to fund the other, or playing shell games, you just create more liability.

9. The UCC lien clause

The UCC-1 is a heads-up to other lenders that the funder has a claim on your receivables. It typically lasts for 5 years unless continued. It may scare them off, but you can keep it at bay by settling and making sure they terminate it quickly with a UCC-3. Coming to terms can mean either lower payments over time or a lump sum at a discount. Plus, they must mark the judgment satisfied and lift any bank freeze. If a funder claims they bought your receivables, they might argue they don’t need to terminate anything. Make sure your settlement says they have to file a UCC-3 within a set time.

It’s so important to save the contract, every broker email or text, and all records of every single debit. Where you stand now decides what your path is. Keep in mind that the deadlines are short.

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.