9 Terms in Your Rbs Capital Source LLC Agreement That Matter Once Suit Is Filed

In the midst of the panic, you reach for your advance agreement to search for anything that might get you out of the suit. Protecting yourself in a merchant cash advance lawsuit requires understanding both what makes you liable and what you can do about it. There are a few features in most contracts that mean a lot in terms of liability. The claim made by the funder in the complaint is not necessarily true. Simply because the funder said you did something, does not mean you actually did it. Additionally, regardless of how much the funder claims you owe, they still need to prove that amount.

1. The events of default

The events of default are the specific events that give the funder the right to pursue the case against you. The first question to ask yourself is, “did you do any of the things claimed in the complaint by the funder as events of default?” If the answer is no, your first argument in your defense is based on that.

The most common defaults are blocking ACH debits, changing or closing the bank account where debits are made, switching card processors, selling the business, and providing false information on the initial application. Check the language of the complaint about the events of default with what the contract actually says. A returned payment is not always an event of default.

2. The purchase language

The purchase language is the wording of the contract that says the funder is purchasing your future receivables. Your business is the seller and the funder is the purchaser. There is more to a purchase than simply agreeing in writing that it is so. The behavior of the buyer and seller in the purchase and sale matters.

3. The reconciliation clause

The reconciliation clause determines how your payments can change and what the changes mean. Read the reconciliation clause closely and look at how it was followed, if at all. Were you supposed to request reconciliation and then payments would be adjusted accordingly? Did they reconcile when it was time?

Falling sales don’t necessarily stop debits. The court wants to see whether reconciliation actually happened and not just what the contract says. Keep every request for reconciliation and every response.

4. The ordinary-business-risk clause

Does your contract have language saying a slowdown or closure from ordinary business problems is not an event of default? If so, and the facts support it, the funder may not be able to demand the entire balance due. This means it can be a question of fact for the court.

5. The term and bankruptcy provisions

New York judges will look beyond the language of the contract to see whether the cash advance really is a sale and not a loan. Some of the factors the court will consider are whether the contract has a real reconciliation clause, whether the term is finite, and whether the funder can still collect money if the merchant files for bankruptcy.

A loan also cannot have a criminal usury rate. It is a crime to charge more than 25% on smaller loans in New York. Where that happens, the contract is void as the law cannot make a criminal act legal. But a high interest rate alone does not void a cash advance. In 2025, the Appellate Division sided with a funder. It explained there was an ongoing reconciliation clause, no fixed term, and bankruptcy was an excuse. And the limit didn’t apply at $2.5 million or more.

6. The personal guarantee

Funders will often bring in the guarantor on a breach of contract lawsuit against your business. If there was a personal guarantee, you may be liable in your own name for the money at issue. Some guarantors guarantee just payment, others cover conduct. Sometimes, a guaranty may cover only certain acts like moving accounts or closing the business. If you didn’t do those acts, and your losses were due to an ordinary slowdown, it may not reach you. And if the agreement is void, the guarantee may go with it.

7. The fee provisions

Default and NSF fees are usually included in the amount claimed. In addition, there will often be attorneys’ fees. Many agreements have a fee provision that will be a fixed percentage of the balance claimed. The court can reduce attorney fees that are working as a penalty, but that is a fact-driven discussion.

To check the amount claimed, grab the cash advance agreement itself, a spreadsheet, and the bank statements for the time at issue. See whether the math matches up. Look to see if the payments are correctly applied.

8. The choice of law and forum

The agreement may say the lawsuit has to be brought in New York courts and under New York law. This may put the case in New York, but this language in the contract can be overruled by the facts. To bring it there, a court must have “jurisdiction,” which means a right to hear the dispute. Check, too, if you were properly served with the lawsuit.

9. The confession of judgment

Some agreements contain a confession of judgment. This is a form that allows the funder to easily obtain a judgment against you. If there is a judgment already, check where it was filed and whether it was allowed. If there’s a Confession of Judgment, it can be only filed in the county where you reside, as listed in the affidavit you signed, or where you live at filing. A business is considered a resident in any county where it has a place of business. It must be filed within 3 years of signing it.

Understand Your Deadline to Respond

In New York state courts, the deadline is 20 days if the papers were handed to you. It is thirty days if the complaint was served in most other ways. The deadline is twenty-one days in federal court. If you miss it, the court can enter a default judgment against you. Before moving receivables or transferring the business, changing the debited bank account, or signing a new advance, it is key to ask a legal professional what that could mean. Each step may be a new default in the agreement.

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.