Your Goat Advance Agreement: The Terms That Matter Once Suit Is Filed

If Goat Advance, a merchant cash advance funder, has sued your business, the complaint probably says that Goat Advance provided you with an advance and that, by contract, you agreed to pay back the advance. The complaint will likely say that you did not keep up on your payments, and now Goat Advance is coming after you. The complaint will probably say that the agreement is a receivables purchase agreement. For starters, you would need to check your agreement (which you probably had very little time to check when you signed it). The agreement will almost certainly say that you did, in fact, agree that the agreement was not a loan. But, if Goat Advance is suing you over a merchant cash advance, you should not just assume that all the law is on their side.

While the transaction will be sold as an advance against receivables, the important terms are the ones that tell you whether it acts like a loan. The reconciliation clause, for instance, decides whether the funder has to adjust your payments when sales fall. And the bankruptcy clause decides what the funder’s recourse will be if your business goes bankrupt. With any MCA agreement, you also need to check to see whether a confession of judgment is in effect and, if so, whether the court where you are being sued has the power to enter judgment under it. Finally, you should check to see if there is any personal guaranty, as that will tell you whether the funder can go after your personal assets.

An Agreement That Acts as a Loan

Although the agreement you signed may say it is a receivables purchase agreement, that does not determine what it really is. In New York, an agreement that acts as a loan will be held to be a loan.

The law against charging more than a certain rate of interest, called usury, only applies to a loan. If there was not a loan, there cannot be usury. It does not matter how unconscionable the agreement looks. Courts usually look for three things to decide if an agreement acts like a loan.

• The first is a reconciliation clause, which determines whether payments to the funder adjust if the merchant’s sales go down.
• The second is whether the agreement has a finite term.
• The third is whether the funder’s recourse for getting paid runs out if the merchant files for bankruptcy.

If there was a loan, the next step is whether the rate violated the law against criminal usury in New York. In New York, charging over 25% a year on a loan knowingly is criminal usury, a class E felony. The usury law does not apply to loans of $2.5 million or more.

If the interest is so high it violates the criminal usury law, the corporation or LLC may argue usury. If the law against criminal usury applies, then the loan is void and the borrower no longer owes the principal either. But a business who borrowed at a criminal usury rate can only argue that defense against what they still owe, not to recover payments they already made. And in the case of criminal usury, a very high rate by itself does not automatically make an MCA into a void loan.

In February 2026, New York’s Appellate Division for the First Department decided that advances made by Richmond Capital Group were loans. The court did not let Richmond get away with calling them receivables purchases when the real agreement was one for a loan. First, although the agreements had reconciliation clauses in them, they were never used. Second, the daily payments did not reflect any good faith estimate of the merchants’ average sales and receivables.

In Kapitus v. Suburban Waste, Inc. (February 2026), the appeals court refused to rule without a trial for either side, given the confession of judgment in the contract. That meant the funder could have tried to enforce a judgment and, if the merchant had gone bankrupt, try to collect on the guaranty of the debt.

A New York bankruptcy court in February 2026 agreed it was possible the merchant cash advance in that case was a loan, even though their contract said it wasn’t. The merchant pointed to an allegedly “illusory reconciliation” limited to one calendar quarter. A reconciliation clause that was illusory as a practical matter would mean the funder was immune to decreases in the merchant’s sales. The court also pointed to fixed weekly payments, which made it seem like the merchant’s debt had a definite end date and the funder could work out the debt in advance. The merchant also claimed the funder could go after their assets if there was any “material breach” or financial misrepresentation. The court said that was enough for the merchant to survive the motion to dismiss, at least. The bankruptcy court did not decide yet whether the agreements were loans.

Some agreements have no reconciliation clause at all. Then there are agreements that actually have a reconciliation clause, but where the funder will not do it when the merchant requests it. When that happens, there is still reconciliation on paper, but as a practical matter, the payments never change. In others, reconciliation is just supposed to happen automatically, on their schedule. Either way, the best ways to discover if there is real reconciliation are to request reconciliations yourself on your own initiative, if the agreement allows it, and to keep the funder’s answers.

Confession of Judgment

Not all funding contracts have a confession of judgment. Even without one, though, the funder can still sue the merchant for breach of contract. Under CPLR 3218, a confession can be filed only in the county named in the affidavit as the residence of the defendant or where they live when the confession is filed. For a business, that means the county the business had a place of business in. No matter what, it has to be filed in three years of signing.

On April 23, 2025, the New York County Supreme Court entered judgment on the funder’s confession of judgment against the merchants in that February 2026 bankruptcy case. The merchants never brought up usury there, so that would be binding now, the court said. They only had one bite at the apple. That means you should raise it as early as possible.

Your cash advance agreement may also include a guaranty by you as the owner. The guaranty may be narrow and only cover one duty, such as not moving the accounts. Or it may be very broad and guarantee payment of the debt. If the guaranty is narrow, the owner may not owe if the business slowed or closed for ordinary reasons. And if the contract ended up void as an illegal loan, the guaranty may not stand either.

To win in court, the funder must prove that they have a valid agreement with the merchant, that the funder paid for the purchase, that the merchant broke a duty in the contract and that the funder lost money as a result. If they can’t prove one, their claim can be attacked. But the law says the merchant must prove its own defenses, like usury.

What counts as a default depends on what the funding agreement says. It usually includes stopping ACH debits or switching account or bank. And sometimes deliberately wrong application information or closing the business are defaults, too. A returned payment is not always a default, and the agreement may say an ordinary slowdown or closure is not one.

If your business is outside New York, it may be easier for the funder to sue you in New York than anywhere else. New York’s statute providing out-of-state litigants access to its courts applies only to deals worth at least $1 million. But not all lawsuits by MCAs against out-of-state businesses will end up in New York. It would depend on the agreement and other facts of the case. There may also be a clause for arbitration. The Federal Arbitration Act generally makes those enforceable.

Missing the Deadline to Answer

In a New York suit, if you were personally handed the summons, you will have 20 days to answer. Missing the deadline to answer can mean the other side gets a default judgment. If it does, you will need to move to vacate. But you should make the motion to vacate within one year of being served with a notice of entry of the judgment. That’s true even if the collector keeps on trying to collect. Calls with a collector don’t stop the court deadline.

• Find the original contract and make sure it says what you think it says.
• Gather up any personal guaranty.
• Gather up the bank statements showing when the funder debited the account(s) it paid into.
• Gather up your emails with the funder and especially any reconciliation requests.
• Make a spreadsheet of every debit they took from your account.

All those would tell whether the terms of the deal were what the agreement promised.

Damages in a funder’s complaint will generally be any unpaid balance. It may also claim fees for default, returned payments and attorney’s fees. Attorney’s fees usually come to a fixed percentage. With interest and costs added, the total damages may seem shocking. You need to check the math against your bank statements. Also look for debits not credited and other unfair fees.

Don’t just rush to sign on for another merchant cash advance or redirect your receivables. And don’t sign away your valuable personal assets without checking with a lawyer first. With an MCA, some of these actions may create new defaults. Settlement may be possible, but it depends on the strength of each side’s position and how clean a release the other side is willing to give.

If you had a merchant cash advance agreement and then paid it off, the funder must take care of any liens within 20 days of a written demand. But when the funder bought your accounts, the termination statement is due only when all account debtors have paid.

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.