Mayfair Business Capital Lawsuit: 6 Defenses Worth Raising in Your Answer

Mayfair Business Capital is suing your business. What do you do now? Do you ignore it? That’s usually a bad idea. In New York, if papers were handed to you in person, you must answer within 20 days. If served by most other means, it’s 30 days. Some defenses must be raised in the answer or they may be lost. There are six defenses other companies in cases like yours have raised before. This isn’t a sale but a loan; they are charging usury, which is a crime; the reconciliation clause is fake; their revenue estimates are overblown; they are claiming conflicting damages numbers in different places; they served you incorrectly.

1. It’s a loan, not a sale

The court doesn’t care what the piece of paper calls it. It looks at what the payments really do. If you owe all the money back no matter what, and you have no choice, the court is likelier to call it a loan. Courts usually consider three things. Can the payments actually be reconciled to actual sales or do they go on no matter what? Does the contract have a fixed term? Would their company get some money back if your company went bankrupt?

If it’s not a loan, there’s no usury, however unconscionable the rate of interest is. However, take caution. One funder said its deal wasn’t a loan, it took the risk of slowdown and had no recourse in bankruptcy. The court said it was not a loan.

2. Criminal usury

Usury is a crime in New York for loans, not for sales. No company can claim that someone charged them too high of an interest rate, except that if the rate is above 25% a year, they can claim it was a criminal loan. Knowingly taking more than 25% a year for a loan is a felony in New York. That would make the whole loan void from day one, so the lender would get back none of the principal or interest. Your answer would need to state facts that showed that the alleged loan was illegal.

The federal Second Circuit in 2023 and the New York bankruptcy court in 2026 have ruled against companies that did exactly this, calling their sales loans and the interest rates way too high.

3. The reconciliation is fake

Some agreements have a clause where they say they’ll look at your documents and it’s possible to reconcile the payments to your actual revenue. If the funder decides what’s a good enough reason, they can always say no. A reconciliation clause like that has no power to enforce. Or even if the terms sound fair, if the company drags out asking for more forms or documents while still taking money from your account, the whole thing may be useless.

The 2023 federal ruling turned on this: Changes were at the funder’s sole discretion, and they could go after guarantors. Search your contract for those words. In a New York appeal the clauses survived, as they lacked “sole discretion.” Whether they actually work or not is a factual question that is usually decided in court.

4. The estimate was invented

These contracts start by predicting your revenue. Some companies quote very high figures for this number. But it has to be based on your real sales, or you can claim they’re puffing the numbers. Two of five judges in a New York appeal agreed. The two judges pointed out that calling $3,500 a day 25% of their revenue means they have revenue of $14,000 a day. They actually did $1,232 a day.

Even though those two were outvoted on that test, it’s worth comparing the estimate to your real sales. Round numbers of payments can also be the sign of a loan, not a sale.

5. Conflicting demand amounts

What amount do they claim you owe? Sometimes they claim different amounts in different places, even in the complaint that says what you’re being sued for. The funder has to prove the agreement, that it held up its end, that you broke it, and what its damages were. If its own papers are all over the place, the judge can turn down its motion.

Same appeal, different issue: The manager’s sworn affidavit and the verified complaint claimed different amounts. No explanation. The $229,780 judgment got reversed. The guaranty claim fell too.

6. Service and filing defects

Did they correctly deliver papers saying you’re being sued? Raising improper service in your answer saves the issue but is meaningless unless you also ask the court for a judgment on it within 60 days. Or get the court to extend that time limit due to hardship.

A confession of judgment can only be filed in the New York county where you lived or did business, and within three years of signing. In 2019 New York got a law to stop these from being filed in New York state against a debtor who didn’t live in the state.

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.