When Ibex Funding Group Sues Your Business: Mistakes Owners Should Avoid

Ibex Funding Group and other merchant cash advance firms have never been afraid to sue their targets for nonpayment. If one of them files a summons against you, the worst thing you can do is to ignore it. Talk to a lawyer this week, because these cases have strict deadlines to get an Answer filed, and when that deadline passes, the lender will get a default judgment against the business and freeze your accounts. That’s not the end of the bad news. Often you signed a personal guaranty for the merchant cash advance, making you personally liable for the debt. And if you are discussing a settlement with Ibex, don’t make the mistake of thinking those talks pause the court process. Take action when the court papers come in, keep a close eye on the deadline, and get a lawyer involved while you still have a chance to head off these disasters.

At the top of the complaint, find the name of the plaintiff. It is likely to say “Ibex Funding Group” or “Ibex Funding,” but these are only trade names. The real plaintiff might be World Global Capital LLC. The Attorney General of New York filed a petition against Yellowstone and a slew of other business names in March 2024. World Global Capital, LLC used several names to market and service merchant cash advances, according to the state Attorney General’s petition, including Ibex Funding Group. The Attorney General of New York announced in January 2025 that Yellowstone Capital LLC and 25 companies it controlled faced a $1.065 billion judgment. The case canceled debts for more than 18,000 small businesses across the country and forgave $534,552,724 owed by them. Small businesses across the country affected by the decision had six months to fill out a claim form. It’s possible that your deadline has already passed.

20 Calendar Days from the Date of Service

If you were personally handed the summons and served anywhere within New York, you have 20 calendar days from the date of service to appear in court, by serving an answer, a notice of appearance, or a motion extending time to answer. Small businesses face these cases in the most varied ways possible. Some are served personally, by a process server who comes to the door. Some get a summons sent by the Secretary of State. Examples of this kind of service include service by substituted service on the business and mailing to the owner, or service on the New York Secretary of State if the defendant is a corporation. The defendant gets a longer period to answer in these cases: 30 days after service is complete.

Keep in mind, every lawsuit is different, so this general description of the usual New York lawsuit procedure may be altered by statute or court rule in individual cases. Your lawyer can help you figure out the precise time frame you have for filing a lawsuit Answer. The rules change state by state, as well. Look up the court and find the court website to determine the specifics.

You don’t need to be based in New York for the case to go forward. It can be very tempting to ignore the summons, thinking the court has no right to put the out-of-state business on the defensive for a debt incurred elsewhere. But ignoring the papers leads to a default judgment, and many courts have the legal authority to assert personal jurisdiction over out-of-state defendants and enter a judgment against them.

If you don’t file an Answer or a notice of appearance or a motion to extend the time to Answer, the lender will ask for a default judgment. If the claim is for a sum certain, the plaintiff applies to the clerk, within one year of the default. The application has to include an affidavit of the default, a copy of the claim, a proof of service of the summons, and a breakdown of the amount. The clerk enters judgment for the principal, interest, and costs.

If your company is a registered corporation in New York, the plaintiff can serve the lawsuit on the New York Secretary of State as your “agent for service of process.” This is the same as service of the lawsuit on you, though there are important timing consequences. Service on the Secretary of State alone is not enough to get a judgment against you. If the plaintiff mailed the summons to the last known address at least 20 days before judgment, not receiving it doesn’t prevent the clerk from granting the judgment. Corporations should always keep a current address with the Secretary of State, and be alert for summons service by mail.

But you don’t have to live with the judgment. In New York state court, you have one year from the day you get served with the judgment and notice of entry of the judgment to ask the court to vacate the judgment for “excusable default.” It’s a narrow exception, meaning you will need a very good reason for failing to answer the case.

A confession of judgment says that you owe a debt and allows the plaintiff to get a judgment against you without going through the usual lawsuit process. Some states (not all) have heavily restricted or completely banned them. In New York, a confession of judgment has to be filed in court within three years after the affidavit is signed. Although these documents can seem unchallengeable, your right to fight them depends on the jurisdiction.

Only a Lawyer Can Defend the Case

Do not make the mistake of confusing a settlement company’s function with that of a lawyer. Paying the debt is a separate issue from defending the lawsuit, and only a lawyer can defend the case. In New York, a corporation must appear through an attorney, except in certain small claims and commercial claims courts. A good lawyer will file a pleading or motion, not a letter or conversation. A motion may seek to dismiss the case, or move the case to arbitration, or buy you more time to file an answer. You may think you need to file a motion to dismiss before answering the complaint, but it isn’t always that way. Later deadlines keep coming up.

The papers you throw in the garbage can have the vital information about the company suing you, how they served you, and the dates, addresses, and phone numbers the court needs to communicate with you. And once they are gone, you may never be able to reconstruct them from memory. Keep them, along with all the emails and letters you exchange with the plaintiff. Look also for copies of the contract you signed, the payment history, any written reconciliation requests or account adjustments you made. Note down how the summons was delivered, by whom, and when.

People usually assume the balance stated in the complaint is correct, or at least some magic number the lender came up with. But these calculations don’t happen by magic. The complaint only shows the balance the lender claims is due, and nothing proves that the calculation is correct. Look carefully at the terms of your contract and compare the amount they say they’ve collected with the amount the lender claims you owe. What are all the deductions, fees, and credits? What was the original amount advanced? What was the amount taken so far? Does the balance make sense?

The lender calls it a loan or an advance or a factoring or a merchant cash advance, but courts do not blindly accept the word used. Merchant cash advances are not loans, according to the merchant cash advance companies. Not all courts agree, however. The criteria are set out in cases like LG Funding v. United Senior Properties, a 2020 New York appeals decision. The factors include, among others, whether the reconciliation provision actually allows the merchant to reduce its liability when its revenues fall short, whether the term of the agreement is finite, and whether the lender has recourse if the borrower goes bankrupt.

When your actual revenue fell short, you were supposed to ask for an adjustment, called a reconciliation. Check the original agreement for terms on reconciliations and how to request them. Note all the requests you made and what proof you sent to back them up. If you got a response, how did you receive it, when, and what did it say? The court will need those details if there is a fight over enforceability.

In New York, criminal usury is an interest rate above 25% a year, and it’s a felony. Corporations may not use common law usury as a defense, but they may raise usury under the New York criminal usury statute.

A guaranty is a contract with the lender. It might be in a separate document, or it might be an extra section in the contract signed with the business. The contract should say what conduct triggers the guaranty. There is more than one kind of guaranty, and the guarantor may be entitled to different protections depending on the kind, and on whether the guaranty is conditional or unconditional. Don’t assume, from the fact that the lender sued you personally, that the plaintiff will win automatically. Find out whether the business and the owner need separate counsel to defend the case, or whether their interests are so opposed that separate counsel is unavoidable.

If your account is frozen or your processor is holding back payments, keep your documents and receipts organized and don’t give away any rights you might have. Are any of your customers getting calls or letters about this case? Have you been served with a subpoena to go to court? Has the lender tried to put a UCC lien on your business assets? Talk to your lawyer about what’s happened and what, if anything, you need to do to deal with it. Stop for legal advice before you move accounts, whether you pay them or not.

Settlement Talks

Some people think that once a court case starts, they should leave off all negotiations until their “day in court.” No! You are always able to make a reasonable settlement offer, no matter how far the case has gone. In most states, the plaintiff can’t use any of your settlement talks in court to prove that you owe the debt. They may say, ‘Just pay me this much.’ That sounds like a great deal at the time, but don’t take the offer unless you mean to pay it.

Whenever you and the lender reach a settlement, make sure it does what you expect it to do. Before you sign any settlement, check that it names all the businesses you want it to cover, that it includes a total payment amount, and the dates of each payment. Check the release language: Is the owner covered? Is the guaranty released? How do you prove to the court that a settlement happened? Is the settlement contingent on a payment? What are the consequences if a payment is late? Is the UCC lien released? What about any restraints on your bank accounts?

Many small businesses have outstanding debt from several merchant cash advance contracts. If you settle with one funder, make sure you keep a careful separation between that account and any other MCAs that may have sued you. A payment plan is an agreement between you and the lender, and does not bind anyone else. Each agreement is a separate contract, and you still need a separate release for each case.

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.