A summons arrived, probably naming you personally alongside the company. Two things to internalize immediately: there’s a deadline, and missing it hands the funder everything without a fight. Most MCA cases end in default judgment because the owner froze.
First moves
- Calendar the response deadline the day you are served. It is short and it is jurisdictional.
- Do not call the funder’s lawyer to explain your situation. Anything you say is available to them later.
- Collect every agreement, addendum, bank statement, and piece of correspondence. Ninety days of statements minimum.
- Get counsel who has defended commercial funder litigation. This is a specific practice, not general business law.
- Check whether your deposits are reachable and whether payroll needs to move before a restraint lands.
The defenses that actually get raised
- Recharacterization. The agreement is documented as a purchase of receivables, but a fixed term, a payment that never flexed with revenue, and a broad guarantee all point toward a loan. If a court agrees, usury law comes back into play and the interest may be uncollectible.
- Breach of the reconciliation provision. If the funder never honored the clause that makes the deal a purchase, it breached first, and it has undermined its own legal theory in the process.
- Defective perfection. A UCC-1 filed against a misspelled or wrong entity name affects what the funder can claim as secured.
- Improper acceleration or miscalculated damages. Confessed and claimed amounts are frequently larger than what is actually owed.
- Procedural and jurisdictional problems, including venue and service.
Most defended MCA cases settle rather than get tried. That is the point of defending. A credible answer with real contract defenses changes the funder’s risk calculation, and the settlement number after that filing looks very different from the number before it.
People of the State of New York v. Yellowstone Capital LLC et al. (N.Y. Sup. Ct. 2025). The Attorney General secured a $1.065 billion judgment against Yellowstone and 25 affiliated entities, the court finding that advances with fixed daily payments, short 60 to 90 day terms, and no meaningful reconciliation are loans rather than purchases of receivables, and therefore subject to New York’s criminal usury statute (N.Y. Penal Law §190.40, 25 percent). Outstanding debts were cancelled for more than 18,000 businesses nationwide.
If a judgment already exists
Still not over. Confessed and default judgments get vacated, reduced, and settled constantly, because the underlying paperwork is often sloppy and because enforcement is expensive with an uncertain return. Depending on the state there are procedures to strike or open. Move fast, because every week of enforcement compounds the damage.
A funder that overreached, sent notices on a defective filing, or misstated its position to your customers has taken on exposure of its own. Its counsel knows it. That is frequently why cases resolve quickly once a competent response lands.
Getting out of an MCA is not a DIY project. The funders have lawyers. The contracts have confessions of judgment. Someone has to read your agreements, line by line. Our #1-rated firm does that on a free call. No upfront fees.