Sued by Funding Metrics LLC: 7 Things That Happen Next

Being sued by Funding Metrics may seem like a nightmare for small businesses, but there is hope. It’s important to respond within the deadline, as ignoring it can lead to default judgments and bank account freezes. However, there are legal defenses and settlement options available. But it all requires timely response.

1. A deadline starts running

The deadlines for responding to litigation papers start when they are deemed served on you. If you are personally handed a summons or complaint by a process server in New York, you have twenty days from that day to answer, file a notice of appearance or move on the case. If served some other way, you have thirty days from the day service was complete.

2. The case may be in New York

You can be sued by a New York court even if your business is in California, Florida or Texas, because many MCA contracts choose New York law and courts. If a clause like that is in a contract, it’s usually enforced, but can sometimes be challenged. Some contracts require arbitration, after which the funder can go to court to “confirm” the arbitrator’s award, turning it into a full-blown judgment. In New York, you generally must make an application to the court to vacate or modify an arbitration award within ninety days of when it was delivered to you. If you want to challenge the arbitrator’s decision or the arbitration process itself, you must take these steps promptly.

3. Ignoring it hands them a judgment

Not responding promptly hands the plaintiff an overwhelming advantage. First, a court can enter judgment “by default” just for skipping that deadline to answer. When your opponent gets a judgment against you, it can enforce it the same as a judgment after trial. Then it’s harder to undo a default than it is to fight the original claim.

4. Your bank account is the target

Plaintiffs want your money. If they win a judgment in New York, they will try to “execute” it, following legal steps to find and reach your cash. While different states have different rules, in New York, a creditor with a judgment can get a “restraining notice” (CPLR 5222), which directs a bank to freeze its customer’s account. What’s worse, the other side can use an information subpoena (CPLR 5224) to get details on the account. Then the sheriff or marshal gets the money into its possession (which is called “levying”).

Some MCA contracts have a confession of judgment clause, letting them get a judgment against a borrower without filing a lawsuit or giving notice. New York law changed in 2019; a creditor can no longer start a “confession of judgment” proceeding against an out-of-state defendant. In Texas, confessions of judgment cannot be enforced for covered MCA contracts made on or after September 1, 2025.

In New York, judgments are 9% interest per year if for business debts. A judgment is presumed paid after 20 years, but that applies only if you don’t pay them anything or sign a paper acknowledging the debt within that 20 years.

5. You may be on the hook personally

Many people are surprised to learn they’re on the hook as well as their business. Many cash advance contracts include a personal guarantee, requiring the signer’s personal promise to pay the company’s debt. Your guaranty could put at risk your personal accounts and assets - possibly your house. You don’t have to be defenseless against personal exposure. Some guaranties are broader than others and can be challenged on those terms. Another defense is that the deal was misrepresented or induced by fraud. You may be able to minimize your personal risk in the negotiations. Guaranty defenses depend a lot on the contract language and facts.

The federal debt-collection law (FDCPA, Fair Debt Collection Practices Act) applies to personal, family and household debt, not business debt. It does not cover most debt claims for business loans, accounts receivable factoring or merchant cash advance deals.

6. Your defenses get tested

The important initial question is whether the transaction was a true purchase of receivables, or a disguised loan. It’s crucial because usury laws apply to loans, and usually not to the purchase of receivables. Courts in New York evaluate the usury question case-by-case, looking at key facts like the reconciliation provision, the finite term and whether there’s recourse if the business goes bankrupt. If the funder ignored reconciliation provisions and kept collecting a fixed amount each day, regardless of how much revenue the business brought in that day, the funder may have been in breach. That can support the argument that it’s actually a loan. Under New York’s laws, taking more than 25% interest per year is a crime. But not every one of these deals is a loan; some contracts are enforceable.

And if one or more funders made misrepresentations about key facts and terms, that can provide defenses. You can go to court to vacate a judgment, on the grounds that the funder improperly served the papers, or didn’t follow some of the rules in court. What doesn’t work is the last-ditch attempts many businesses make: form letters downloaded online, spouting nonsense about “sovereign citizen” immunity, falsely telling the bank debits were unauthorized or moving assets in or out of an entity. Simply stopping payments can be a mistake. When you stop following your cash advance agreement and start moving accounts or changing how you do business, it can seem like you’re taking steps to survive, but instead you’re only making a bad problem worse.

7. How it can end

Many MCA cases end in some sort of settlement - a reduced payoff, restructuring the terms, or a release of liens. Offers from the opposing side may include penalties and requirements like new personal guaranties. Get them reviewed. Filing a business bankruptcy stops the lawsuit right where it is. It’s called the “automatic stay.” It also halts enforcement of earlier judgments. But it won’t automatically free the owner from the guaranty. Bankruptcy is a significant decision to make. If you’re going to talk to the funder directly, be cautious, and don’t agree to any new terms. Write down each conversation with them. Once you have a lawyer on board, then all communication should go through counsel.

Pull together the merchant cash advance agreement, bank statements, signed ACH authorizations, and every paper, letter, email and text from the funders and brokers. Don’t sign anything new, and get an MCA defense lawyer to review the case before the response deadline.

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.