Is Kapitus Legitimate? What the Public Record Shows

Short answer: yes, Kapitus is real, as is its other name Strategic Funding Source, Inc. It was founded on January 24, 2006 and it holds a California lender license. But that is not the same as being legit in the sense of being a decent lender. It has an “F” BBB rating, not accredited. It also sells merchant cash advances as well as loans. The company has been around for almost 20 years, and is headquartered in Arlington, Virginia, with a New York office at 120 West 45th Street. Andrew Reiser is CEO.

It has a California Finance Lender License, Number 603G807. That fact alone moves it to the head of the pack, in that so many shady lenders say they are lenders but don’t have the state approvals to back up their claim. There it sits in a 2018 loan agreement that the DFPI published. Type that in on the California Department of Financial Protection and Innovation search page. That lets you quickly confirm whether the company you are dealing with is what it says. Kapitus’ website says that its loans are provided by Kapitus LLC. In California, that entity has state license number 60DBO-198798. But be careful. Some of its loans are funded through WebBank. The name of the real lender is the one that matters. Look for it in your paperwork. The one you owe.

In Virginia, a sales-based financing provider has to register with the SCC (State Corporation Commission), and pay a $500 fee due on September 15 of each year. If not, it lapses. Kapitus LLC, for example, was listed March 29, 2023. Anyone using the financing through the company should confirm that the registration is current. This is an added layer of protection.

Buying a Loan or an Advance

In a September 2021 letter sent to the California Department of Financial Protection and Innovation, Kapitus told the state regulator it offered two products. One is fully licensed and regulated commercial loans. The other is deals buying a percentage of a business’ future income. Depending on which product you buy, Kapitus may or may not be a lender on your contract. It should be possible to tell whether you are buying a loan or an advance. A contract with a stated interest rate and maturity date is a loan. A contract that describes the deal as selling future receivables is an advance. If you hear one word but the agreement says something else, ask before signing why.

In March 2024 New York’s attorney general sued over 30 MCA companies, saying their deals were really loans at up to 820% a year. The label matters, and it’s the borrower’s job to look and make sure they get the one they want.

An advance can be expensive. Make sure you understand how much money you are actually getting, and what you are paying back. With an advance, get the total payback and not just the percent. The advance will be paid back daily or weekly through withdrawals. The money is taken out even when you have slow weeks. Confirm the method and number of the payments. With an MCA, the payments might be a flat amount or a share of deposits.

Ask whether you have the option to temporarily lower your payments when your revenue drops, and get the answer in writing. If yes, find out how much paperwork you will need to provide and how long your lender takes to respond. If you want to make sure, make each request in writing. (Send the company an email or letter, as well as making a phone call). Note how long it says it takes to answer, and follow up if they don’t meet that deadline.

Consumer protection laws vary by state. California, for example, makes non-bank funders show an annual percentage rate on most offers of $500,000 or less. In New York, that law goes up to $2.5 million since August 1, 2023. The point is to make it easier for you to compare financing. Check that the APR in the offer you get is the same as on the contract you sign. A discrepancy is a red flag. Don’t sign unless you know why.

A Failing “F” Grade from the BBB

The company’s “F” grade from the BBB is the lowest rating it can give. Its low score is partly because it did not answer five complaints. There are eight complaints filed, covering a period of about three years. That’s not a high number for an experienced company. This is just a rating, not a verdict on your loan. But an F for not answering complaints is a pattern. Draw your own conclusion.

Its Court History

One way to size up this lender before you decide is by looking at its court history. Because courts keep records of those lawsuits, the court docket can be a source of information about a company. It is also an indirect look at how aggressive a company’s bill collecting may be. Kapitus has three names, so start by searching its court cases, UCC filings and judgments under all of them. A quirk of its court history is that Kapitus Servicing, Inc. is often the named plaintiff in the court docket. That can be a problem, if the company filing suit isn’t the one that funded the deal. That’s why double-checking the name on your paperwork is critical, as is keeping your copies of the contracts you sign.

There’s no way to know for sure how any company will behave. But researching its court history can give a hint as to what a worst case scenario could look like. Strategic Funding Source, Inc. filed a case in Albany County, NY to enforce a $175,343 default judgment won in Virginia on October 26, 2018. The court decided it February 27, 2025. The company didn’t let go of the debt for years. Judgments follow a business across states.

Bankruptcy might be another source of information about a lender. Harada Family Dental Care filed a bankruptcy appeal against Kapitus entities, case 4:25-cv-00057 in U.S. District Court in Montana. It is only one case, and the outcome is still unknown. A history of court cases is not a judgment on the company.

Litigation defense firms who say they defend against suits from Kapitus point out that the company has an unusual number of appeals rulings in New York courts. They sell advice on how to resist, so take what they say with a grain of salt. The court history with this lender suggests that some owners fought back, and some won. A default judgment is often granted when a person or business doesn’t answer a complaint. One New York court vacated a default judgment against one merchant. The grounds were “reasonable excuse” for missing the deadline, and possible defenses including standing. Those decisions don’t tell you for sure that Kapitus is a good company, or that you should borrow from it. They do show, at least, that fighting back can sometimes work.

The most controversial move in advance contracts, often tucked in the fine print, is a confession of judgment clause. That’s a line in a contract that can let a funder get a judgment without suing you. A signed confession can be turned in to court. The clerk can enter judgment, often within days. Your accounts can be frozen before you know a case exists. You may not get a chance to answer, as you normally would. Since many owners don’t even know they signed the line, they can be taken by surprise. But the law on this is changing. In 2019, New York barred out-of-state confessions of judgment. That line is illegal on any sales-based financing contract sold in Virginia. So even if you signed it, the state law says it has no effect. Be careful, though: old contracts may have the line, and make it hard to find. Double-check yours.

Did you also sign a personal guarantee? If so, who holds it? Does it survive if the business closes? A personal guarantee is a promise to repay regardless.

If you already have a judgment or lawsuit in your name from a Kapitus entity: don’t ignore it, thinking it will go away on its own. Get the paperwork behind it reviewed before you pay. If the wrong company signed you up, for example, it might not have the right to make you pay. If the lender has a default judgment on its side, get that paperwork checked for how good it is. The kind most likely to be reopened is one where the plaintiff got the judgment because no one showed up in court. Don’t be too late, and don’t just assume it’s closed.

You may be able to settle, before or after a case is filed. MCA balances are often negotiated. In part that’s because a verdict isn’t the same as a guaranteed check. The MCA owner still has to do the work of enforcing it. The offer depends on the terms you signed, how far behind you are, and whether you gave a personal guarantee.

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.