6 Mistakes Business Owners Make When Lincoln Funding Solutions Sues

If you are like most people, you have no idea how bad the situation can get when you are being sued by a merchant cash advance funder. You could be thinking, “I just won’t answer the lawsuit and they’ll just go away.” What you don’t realize is that the worst has barely begun. Most people run from conflict, but when Lincoln Funding Solutions files a lawsuit against you, it is best that you face it head-on. In an attempt to help you be proactive in fighting the lawsuit filed against you, this article identifies six mistakes that you can avoid so that you can fight this lawsuit and move forward.

1. Missing the answer deadline

If you ignore the lawsuit, it could seriously harm your rights, because the lawsuit against you moves forward without you. What that means to you is that once Lincoln Funding Solutions has filed a lawsuit against you, you need to ensure that you immediately file a response (aka an “answer”). If you don’t file an answer or provide other specific defense responses, the funder can get a “default judgment” against you. The time you have to respond to a lawsuit varies a great deal, depending on the court where your case is being decided. For example, in New York state court, you have 20 days to respond, if the lawsuit was personally served on you. But if it was served another way, you have 30 days to respond. In federal court you generally get 21 days.

2. Assuming you have no defense

Many people assume that they have no defense to a lawsuit brought against them. This assumption can be very problematic. It is possible that you have a good defense to the lawsuit that you weren’t aware of. It’s very important to talk with an attorney as soon as possible to find out what possible defenses you have against the lawsuit. It’s not something you should have to face alone.

One possible defense: although MCA contracts are not labeled as loans, courts can look beyond the label. If they look at the reconciliation rights, duration of the contract, and whether the contract is recourse, they could find that this is really a loan in substance.

For example, in January 2025, the New York Attorney General won a 1.065 billion dollar judgement against funder Yellowstone Capital. This canceled about $534.5 million owed by 18,000+ businesses. The Attorney General said Yellowstone’s funds worked like loans: there were fixed daily debits that happened no matter what the company earned. It used a reconciliation mechanism rigged so that refunds rarely, if ever, happened.

3. Going it alone

Many people think that they will save money if they handle the lawsuit themselves. This could end up costing you. In going up against Lincoln Funding Solutions, you would go up against professional attorneys who are experienced with lawsuits.

Be advised that Lincoln Funding Solutions’ lawyer’s job is not to help you. Their lawyer’s job is to advance the interest of Lincoln Funding Solutions. So, don’t take advice from them. It’s perfectly normal to feel a sense of defeat and want to end the situation, but before you admit anything, sign anything, or agree to any payments, get the advice of an attorney who is looking out for your interests. Keep in mind that in New York, a corporation cannot represent itself in court. A corporation may appear in small claims court or commercial claims court, but in any other court it must have an attorney.

4. Overlooking a confession of judgment

Whenever you signed an agreement with Lincoln Funding Solutions, they may have required you to sign a confession of judgment. If so, this was a pre-arranged agreement to accept judgment in a future lawsuit. So if there is a confession of judgment, instead of suing you, the funder can just file that confession of judgment to get an easy, quick judgment against you.

In New York the funder can file an affidavit of confession of judgment, to be able to get a judgment entered. This can be done within three years of the date that confession of judgment is signed. Once filed, the clerk enters the judgment and no trial is needed. But in some states, if you sign a confession of judgment, it may be unenforceable, depending on how it is worded and how the law is in your state. Some states have restrictions on confessions of judgment, particularly against out-of-state businesses.

5. Waiting until the account freezes

If you’re aware of your rights, it is better to do something to prevent or address a lawsuit before your bank account is frozen. Doing nothing until your account is frozen by the funder can greatly limit your options in fighting a lawsuit. If the funder successfully sues you and they obtain a judgment against you, you could be at risk of having money seized from your bank account, depending on your state.

If a funder obtains a judgment against you in New York state, it can send a “restraining notice” to a bank to make it freeze your account. This can even freeze up to twice as much as your judgment for one year, or until the judgment is paid off or overturned. If the funder were to freeze your bank account, this could affect your ability to pay your employees, pay your suppliers, pay your personal bills, and keep your business running.

If a restraint is issued, there are ways to challenge it, but they are time-sensitive. For instance, you can try to vacate a default judgment. In New York, a motion to vacate a default based on excusable default must be made within one year of the date that you were given notice of the entry of judgment.

6. Settling without protecting yourself

If you are sued by Lincoln Funding Solutions or they have obtained a judgment against you, you could be tempted to just make a settlement agreement or pay the judgment to make the situation go away. But just paying them may not be the answer. Make sure that you get everything about your settlement in writing, to memorialize the agreement, and to protect yourself. If you agree to pay them, make sure they agree to enter a satisfaction of judgment which cancels the judgement in court.

If you settle, don’t cut corners on paperwork. Just because you have settled the debt for the business, that doesn’t automatically release your personal guarantee; the personal guarantee can be used against you even after the business stops operating. You need the dismissal filed with the court, and if you ever gave a UCC lien, you need a written termination of the UCC-1.

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.