The Stories That Do Not Make the News
MCA defaults produce headlines when they involve lawsuits, FTC actions, or bankruptcies of recognizable companies. They do not produce headlines when a business owner, overwhelmed by stacked advances and daily debits, engages an attorney, settles the debt at a fraction of the claimed amount, and returns to operating the business. The resolution is quiet. The quiet is the point. What follows are seven situations (details altered to preserve confidentiality) in which the outcome was not the one the funder expected.
The Restaurant With Three Advances
A restaurant owner in the southeast signed three MCA agreements in eighteen months. Combined daily debits exceeded $1,400. Monthly revenue had declined thirty percent from the period used to underwrite the advances. The owner had not invoked the reconciliation clause in any of the three agreements. An attorney reviewed the contracts, submitted reconciliation requests to all three funders simultaneously, and demonstrated that the actual daily revenue could not support the agreed payment structure. Two of the three funders settled at forty‑two percent of the outstanding balance. The third, after a motion to challenge the confession of judgment revealed a procedural defect in the filing, settled at thirty‑eight percent. The restaurant is still open.
The Trucking Company Facing a Confession of Judgment
A trucking company in the midwest discovered its bank accounts had been frozen after a New York funder filed a confession of judgment. The company’s owner had never been to New York. The 2019 amendment to CPLR Section 3218 prohibited exactly this filing. The attorney filed a motion to vacate. The judgment was vacated within three weeks. The funder, having lost its primary enforcement mechanism, agreed to a settlement at forty‑five percent. The owner told us afterward that he had been prepared to close the company on the day the accounts were frozen.
The Contractor Whose Customers Received UCC Lien Notices
A general contractor’s largest clients received UCC lien demand notices from an MCA funder, instructing them to redirect payments. Two clients froze all payments pending clarification. The attorney reviewed the assignment and determined that the notices lacked proper authentication under UCC Section 9‑406. A demand for proof of assignment was sent to the funder. The funder could not provide compliant documentation. The notices were withdrawn. The clients resumed payment to the contractor. The underlying MCA was settled at fifty‑one percent.
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