8 Restructuring Standards for NYC Construction Subcontractors With MCA Debt

An MCA funder prices a subcontractor the way it prices every merchant, and the subcontractor gets paid like no other merchant. That gap between the underwriting model and the job site is where construction MCA files break, and eight standards follow from it.

This article sets those standards for New York City subcontractors carrying MCA debt. Each standard is a diligence checkpoint rather than a holding. Documents decide every question below, and independent counsel reads them. Delancey Street appears here as a settlement company, not a law firm.

The Lien Follows the Collateral

Encumbered equipment stays encumbered after sale. A security interest continues in its collateral despite disposition unless the secured party authorized the sale free and clear, and it attaches to identifiable proceeds under the proceeds rule for disposed collateral. Counsel maps and tests every filing before any restructure moves equipment, sells the business or refinances, because payoff terms, written authorization, releases and guarantee releases each need separate review. A UCC filing sits on the business the way a shadow sits on a wall: cast by something real, yet proving nothing about its size. Exceptions exist, though they tend to narrow rather than widen in practice.

Reconciliation Substance

The advance behaves one way in underwriting and another in January. New York courts evaluate MCA agreements by substance rather than labels, weighing reconciliation behavior, finite term and bankruptcy recourse, in the New York MCA characterization ruling. The existence of a reconciliation clause concludes nothing by itself. Underwriting that asked nothing about subcontractor payment will not understand why the account failed, and counsel tests what the debits did when revenue dipped against what the clause promised.

The contract calls it a purchase. The debits call it a loan. The court reads the behavior.

I have yet to see an MCA file where the reconciliation clause worked the way the sales call described it. Slow months, delayed progress payments and retainage held back for seasons at a time expose fixed daily debits for what they are. The protection of an adjusting structure is extremely narrow: a written procedure with records proving it was followed.

Assignment Terms in the Subcontract

Whether the funder may collect straight from the general contractor turns on assignment and notice provisions, assessed alongside the subcontract anti assignment terms and the general contractor setoff rights (which vary the whole question by jurisdiction and by contract, and which counsel must parse before anyone telephones anyone). A call to the general contractor often arrives in order to redirect payment before the subcontractor can respond, which is why counsel reads the assignment clauses first. No dataset tracks how often funders make that call, so frequency claims stay out of this article.

Pay When Paid Realities

Contingent upstream payment collides with fixed daily debits, and the collision is where subcontractor files break. A pay when paid clause conditions the subcontractor receipts on the owner paying the general contractor, while the MCA debits the operating account every business day regardless. Progress payments may carry trust fund treatment in some states, so counsel advises before any project funds move anywhere. Nobody reads the debit authorization until the debits start. The restructure starts when the mismatch is named, documented from payment applications rather than from memory.

Your Lien Rights and Your Calendar

Your best security may be the lien still unfiled. Artisan and contractor lien rights protect the trade that performed the work. The funder does not inherit them and must prove its own perfected interest instead. New York law sets filing windows measured in months for most private work, shorter for a single family dwelling, with a separate ninety day window where retainage is held. The lien you filed, or failed to file, sets the ceiling on this standard, because content, service and enforcement provisions beyond the windows were not part of the captured research and counsel reads the full section before any filing moves.

How much weight a timely lien carries in practice is a question no dataset answers. The windows are extremely unforgiving, which is the entire reason they appear in a restructuring article rather than in a collections one.

Sweeps Are Contract Terms

Daily debits feel like legal process and operate as agreement provisions. Return codes, account distinctions and bank mechanics live in a different inquiry from contract default and legal remedies, and no code on a bank statement decides whether the underlying debt is valid. The funder sweep deserves the same reading as any other clause: what triggers it, what cures it, what it costs to stop. Resist the urge to revoke the debit authorization without counsel, and no return should be manufactured by hiding funds or mislabeling an authorized debit.

Filings End by Demand

Rarely does a filing terminate itself. After payoff the secured party must send or file a termination within twenty days of a signed debtor demand where the statutory conditions are met, under the UCC termination procedure. Payoff alone authorizes no self filed termination, and who may file is itself limited. Counsel ensures every settlement letter carries the demand, the collateral description and the filing office, because stale filings outlive paid debts and poison the next financing.

Commercial Collection Realities

Federal consumer collection protections stop at the shop door. The consumer debt collection statutes cover specified consumer debts, and business obligations with most original creditor collection sit outside them. That exclusion authorizes no abuse, and counsel assesses conduct under the actual debt purpose, the actor and state law. Assume any site conversation about the debt, even briefly held, reaches the funder. Documentation wins more arguments than outrage.

Counsel Assembles the Restructure

And none of the eight standards above negotiates by itself. Counsel stacks them into an order of operations: encumbrances mapped, characterization tested, assignment clauses contained, upstream mismatch documented, lien rights perfected, sweeps renegotiated, termination demands loaded. The moves the subcontractor makes, or declines to make, while that sequence runs decide what settlement can buy.

Delancey Street, a settlement company and not a law firm, carries the sequence into negotiation through a confidential settlement review at no charge, while independent counsel handles the filings, the demands and the hearings. Simply gather the subcontracts, the MCA agreements, and the payment applications showing what the job paid and when, and ensure nothing is signed in the meantime, even briefly, without counsel present.

Subcontractors build on ground others own, with money others release, on schedules others set. A restructure that respects those conditions collects what advantage exists instead of imagining what should. That discipline, applied across eight standards, is what moves a stacked file toward terms the business can survive.