6 Mistakes Business Owners Make When Platinum Funding Sues

Ignoring a lawsuit is never a good idea. If you don’t respond in time, Platinum Funding can ask the court for a default judgment against you.

1. Ignoring the summons

When a Summons and Complaint are served on your business, the first thing to know is that is the start of a lawsuit. The most costly decision you can make at this point is to ignore them. And, at this point, you need to act quickly because you generally have twenty days to answer the summons in New York state court if you were served in person, or 30 if served another way. Don’t put it aside to take care of later. If you don’t answer the Summons, you could end up with a default judgment against you and your business. Platinum Rapid Funding Group and their lawyers can ask your bank to apply the funds in your bank account toward paying the judgment.

If you already have a default judgment against you, there is still a way to undo it in New York State Court if you can file a motion to vacate the judgment for excusable default within one year of the date you were served with the Notice of Entry of the Judgment.

2. Answering without a lawyer

Another costly mistake is assuming you can fix the problem by yourself and not hiring an attorney. Unless you have experience with civil litigation in New York, you will not be aware of the rules of the court and will not know what documents are required. In New York, a corporation generally is not permitted to represent itself in court except in certain small claims and commercial claims courts. You must follow all the rules of civil procedure when defending your company from a lawsuit. And that is almost impossible without legal counsel.

3. Showing up without records

Even if you hire an attorney, another costly mistake is going into court without business records. You should prepare before coming to court by reading the Summons and Complaint carefully. You need to organize documents about your dealings with Platinum Funding and any other business financing lenders you’ve worked with. Check your bank account transactions and organize all emails and text messages. Gather all relevant paperwork and provide it to your lawyer as soon as possible. Make sure your attorney has a copy of the original contract that you signed for your merchant cash advance. Do a review of how much was paid back and how much they claim remains outstanding. Check to see what your paperwork shows versus what Platinum Rapid Funding states in the court documents.

4. Betting everything on usury

Another costly mistake businesses sometimes make when defending themselves against Platinum Rapid Funding lawsuits is assuming usury laws are applicable and letting that form their entire defense. But don’t assume that simply saying the contract was usurious will stop the lawsuit. Some courts have already held that certain merchant cash advance contracts aren’t subject to New York Usury Law. In Platinum Rapid Funding Group v. VIP Limousine Services, the court decided that Platinum’s Merchant Agreement didn’t fall under New York’s usury laws. The judge threw out nearly all of the merchant’s 12 defenses, usury included. Since the agreement wasn’t a loan, New York’s general usury law could not be applied to it. If it is a business and not an individual involved in the lawsuit, a claim of usury alone will be unlikely to succeed. The exception is criminal usury, meaning interest knowingly charged above 25% a year.

Courts usually weigh three factors to determine whether a Merchant Cash Advance is truly a loan. First, is there a reconciliation provision? Second, is the term finite? Third, does the MCA lender have recourse if the merchant goes bankrupt? If it looks like a loan and acts like a loan, the court might hold that it was a loan and still apply the usury statute. So having a usury defense isn’t something you should bet your business on. An experienced attorney will know that it’s better to have two or three defenses that can justify challenging the debt.

5. Forgetting your personal guarantee

Assuming you had to sign a personal guarantee when you took on the Merchant Cash Advance, another costly mistake is failing to realize that your personal assets could be at risk in the lawsuit if the court rules against your company. Platinum Rapid Funding will usually seek judgment not only against the business entity but also against you personally. The VIP Limousine court also held that a guarantor cannot use civil usury as a defense.

Some companies react to the lawsuit by putting assets in the name of an employee or family member or by forming a new business entity. But that may create new legal problems, so ask your attorney first.

6. Settling on a handshake

Another costly mistake is assuming you can settle the lawsuit based on an oral agreement with Platinum Rapid Funding. You might agree to a certain payment amount and send in your check, expecting that is the end of the matter. Any agreements should be on paper and reviewed by a lawyer. A good written agreement between the Merchant Cash Advance lender and the business borrower should make it clear that the lawsuit will be dismissed, all claims against the company and its personal guarantor will be released, any Uniform Commercial Code (UCC) lien filed against the business entity will be released, and how any judgment is either vacated or satisfied.

There are many times when a private settlement can be reached by negotiating with the other side, making a counteroffer that would be agreeable to both parties. Your lawyer can engage with Platinum’s counsel to negotiate the best possible settlement for you and your business. To settle, you can either agree to pay a lump sum that’s less than the full amount you owe or a longer payment plan. Platinum will look at how much it would cost to sue you and the risk that they might lose and contrast that with your ability to pay and the strength of your defenses.

Before starting negotiations, you should also look closely at whether you have to negotiate with more than one lender at once. Many businesses got sued after stacking several merchant cash advances. A repayment plan must cover all of them. If the business can’t continue, you might be better off speaking with a bankruptcy attorney.

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.