6 Theories Counsel Evaluates
Counterclaims Against an MCA Funder

A counterclaim is a lawsuit inside an answer. It requires its own legal theory, its own factual support, and a remedy the court can grant in practice against the funding party.

Because courts examine the two pleadings under separate standards, counsel must build the affirmative case from records rather than from resentment. An owner who has lived under daily debits may wish to answer each allegation with an accusation of equal weight, yet the opening motion tests only whether the pleading states a claim the law recognizes.

1. Separate a Defense From an Affirmative Claim

A defense asks the court to deny the funder relief. A counterclaim asks the court to grant the merchant relief against the financing party, and the second request needs an independent basis in the agreement or in statute.

The owner should name the conduct, the period when it occurred, and the specific remedy tied to that conduct under the governing law. A total that feels excessive does not by itself supply each element the claim requires, and counsel should ensure each element appears in the pleading with record support before it is filed.

Simply keep the agreement, every message, and the complete payment history assembled in one place. Resist the urge to explain the dispute to the collector, even casually, before counsel has mapped which theories have support in the records.

2. Test Any Claim of Misrepresentation

In Culp v. Silverline Services, Inc., a New York appellate court allowed fraud and implied covenant claims to survive dismissal on the facts alleged about calculation of daily payments, then reversed a preliminary injunction for want of adequate proof. This is where most borrower expectations fail, since survival tested the language of the pleading while the injunction ruling weighed the strength of the proof.

For this theory the owner must identify what was said, who said it, and what record preserves the statement. The representation was, if we are being precise, the sentence uttered before signing, not the hope carried into the transaction.

A pleading that survives dismissal has passed a test of language. It has not yet passed a test of proof.

The agreement ran to fourteen pages, most of them devoted to payment mechanics the sales call omitted. An isolated sentence lifted from that call cannot carry the claim without the qualifications that surrounded it, so retain the full exchange with every attachment the advance company supplied.

Often we see owners quote a broker promise that the writing contradicts. The assurance (which industry defenders call ordinary enthusiasm) cannot displace the signed term, and counsel will compare the two before advising whether the pleading can carry the claim.

3. Measure Performance Against the Written Terms

Six months after funding, the dispute concerns the reconciliation request that went unanswered, the disputed withdrawal, or the credit the owner believes was earned and not applied, with a peculiar gap in the correspondence where the answer should be. The file from that period decides which theories remain available.

Counsel needs the provision the owner says was breached, the ledger showing the shortfall, and the correspondence recording each request for adjustment. A general sense of unfair dealing will not carry the pleading past objection, and a court regards with greater care the borrower who invoked the contractual remedy in writing before seeking a judicial one.

The funder drafted the reconciliation clause in order to preserve control over timing and amount, a motive the owner should assume rather than debate. Invoke the clause by letter, preserve the response or the silence that followed, and present the full sequence for review, because a claim built on after the fact objection invites the motion that ends it. The payment history remains the anchor of the file through every conference, call, and submission that follows, long after memory of the sales conversation has faded into uncertainty about who promised what on which afternoon.

Review and analyze the ledger line by line before alleging breach. Whether other funders use identical language is a question this file cannot answer, so a single misapplied debit documented with precision outweighs pages of general complaint about the burden of the advance.

4. Treat the Loan Characterization as an Argument, Not a Result

In LG Funding, LLC v. United Senior Properties of Olathe, LLC appellate decision, the court looked past labels to substance, weighing reconciliation practice, the presence or absence of a finite term, and recourse in bankruptcy. Characterization begins the analysis. It does not end it.

The contract was binding. It was also incomplete. Under the law the agreement selects, applied to the facts this borrower can prove, calling the advance a loan does not by itself produce damages, and proving that it functions as one establishes only the premise, not the award, along an extremely narrow path despite the confidence with which the label gets invoked in negotiation.

Counsel must connect the label to relief the governing law allows on these facts. I am less certain than the preceding paragraph might suggest about how trial courts outside this line of authority will treat identical language, and that uncertainty belongs in the advice before it appears in the pleading.

5. Confirm the Law Gives This Borrower This Claim

A public enforcement order that names other parties does not resolve this account. Read the scope of any government settlement before assuming its protection extends to the obligation on the desk.

Consumer collection protections written for household debt do not govern a business advance as a matter of course. The question of who may enforce a regulatory provision is an extremely technical one, so counsel should confirm which statute supplies a private claim and what remedy it allows.

6. Coordinate the Pleading With Settlement Review

Delancey Street can review the MCA obligation through its merchant cash advance settlement service, which offers a free confidential initial review. Bring the litigation calendar and every theory under consideration, so the commercial discussion reflects the posture of the case against you.

The company is a debt settlement company, not a law firm. Independently licensed counsel handles representation and decides which claims the answer may carry. The steps you take, or do not take, in the days after service will shape both the defense and any affirmative demand, so counsel will review the terms, identify the deficiencies, and construct a response that addresses the contractual claims and the practical limits of the account.

Most owners do not call until an answer is due. I understand why. The pleading that survives runs narrower than the grievance behind it, and narrowness here is a virtue, because a single supported claim outweighs a page of accusations the record cannot carry. The objective is to ensure no release signs away a demand the owner meant to preserve, and to protect and preserve the documents that give the remaining claim its force.