Sued by Eminent Funding: 7 Things That Happen Next

Merchant cash advance companies like Eminent Funding offer an agreement where a company will purchase future receivables from you, and they’ll usually make daily or weekly deductions from your bank account. Suits filed by commercial debt collectors and creditors proceed on a strict timetable. In your case, somebody wasn’t happy with your cash advance (MCA) arrangement, and brought suit in court. The lawsuit (“lawsuit” and “suit” and “case” are all the same thing) has deadlines and schedules, and like traffic court, if you ignore them, the judge will make a ruling against you. If you do nothing, you will likely be defaulted and subject to the collection methods available to all creditors. The creditor has to follow rules too, though. You may have defenses that you are not aware of.

1. The clock starts running

You get the lawsuit documents. When you get served, the lawsuit is in motion, and a clock starts running. Depending on the delivery method, you have anywhere from 20 to 30 days after service (receipt) to appear and file a response (answer). If the complaint and summons were left with someone else in your household or business, or nailed to your door and mailed, or served on you out of state, you have 30 days after service was complete (the date of the final step). If the server handed the documents to you personally, you generally have 20 days. If you don’t respond in time, you may be defaulted.

2. A judgment can come fast

Being defaulted is a bad thing. If you do nothing, the case will be decided, and the other side will win. They will get a money judgment. If a judgment was entered, there is still a chance to fix the situation with the court. If you missed the deadline, but you have a really good reason, you can ask the court to vacate the default judgment. This can be done within one year after you were served with the judgment and notice of entry.

If you already signed a confession of judgment, the funders can proceed to judgment and skip past the court altogether. All the funder has to do is file the confession with the court. In New York, a confession of judgment can be filed only in the county where you listed a residence, or where you actually live. A business lives wherever it has a place of business. A funder can file at any time up to three years after you signed the confession.

3. Your bank account freezes

A judgment creditor can freeze your business bank account. If a restraining notice is served on your bank, it can freeze up to twice the amount of the judgment in your account. That means money already in the bank, and any money that arrives for one year afterward. The freeze lasts for that year, or until the judgment is paid or vacated, whichever comes first.

4. The debt keeps growing

Interest will keep adding up after a judgment. That is normal. For New York state courts, the interest rate will be 9 percent per year on a business debt. In New York state, if the judgment lien is against real estate, it will be good for ten years from the date of the judgment filing.

5. The fight: loan or sale?

The litigation process is often over the question of whether the deal was a loan, or a sale of future revenues. This makes a big difference. The funders will argue their contract is really a sale agreement. But it doesn’t mean the judge will agree with them. The law looks at the whole deal. It does not matter what the parties call the transaction. New York courts usually look at three factors. Is there a reconciliation provision? Is there a finite term to the agreement? The third factor is this: does the contract leave open the chance of recourse, if the merchant goes bankrupt, to the balance of payments otherwise due? If the court thinks it is not a loan, the usury laws cannot apply. Usury is a serious matter. A contract that violates the criminal usury laws is totally void. Void means there was never a valid agreement in the first place. That means the funder will not be able to recover all or part of the money advanced.

6. The funder must prove its numbers

The party suing you has the obligation to prove their claims. The funder must show it complied with the terms of the agreement. You can challenge the amounts. In one 2025 case, the court agreed the deal was a revenue purchase and not a loan. It based its opinion on the fact there was no recourse, there was no fixed term to the arrangement, and there was a reconciliation clause in the contract. The court reversed the judgment for the funder. It looked at the complaint, and the manager’s affidavit, and found those two filings had conflicting numbers for what was owed. It decided the funders had not made their case, because they had not provided an explanation for that.

The owner there had also signed a personal guarantee. In that case, the claim against the guarantor depended on the breach of contract claim succeeding, and so fell with it. The funder still has to prove your liability.

7. Read your own contract

You have to do your homework. Many cases turn on details. A good strategy is to read the contract to see what it says, and to know what you actually promised. A reconciliation clause is not necessarily a reconciliation clause in the eyes of the law, if the funder has complete discretion to decide whether or not to use it, or whether there are penalties for ignoring it. The matter is far from settled by that decision. Two judges in that case wrote separately. They said also check whether the daily payment’s revenue ‘estimate’ fits your real revenue. The contract’s daily repayment estimate implied it was expecting revenues averaging $14,000 a day. The actual average daily revenue had been only $1,232 over about three years. That was less than ten percent of the estimate.

You must file and serve your answer in the time allowed to you. If you do not, you risk a default. Every case is different, and requires individual analysis.

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.