Subcontractors
When an MCA Funder Contacts the General Contractor Who Owes You

The general contractor received a demand concerning money the subcontractor earned. That receipt settles nothing about who is entitled to the subcontract balance, though it starts a clock the subcontractor cannot afford to ignore.

Payment held during a dispute affects payroll and completion costs within days. The legal question moves slower than the cash question. The distance between them is extremely uncomfortable, and the subcontractor must manage both without conceding rights counsel has not examined.

The Notice and the Subcontract

Obtain the complete communication rather than a relayed summary. Resist the urge to call for clarification, even briefly, before counsel has read the file. The attachments, the account references, and the date of receipt all belong in the file before anyone characterizes what the funding party wants.

A request for information, an assertion of assignment, and a direction to pay a different account are three different acts (which counsel for the industry will sometimes describe as routine correspondence, a description that answers none of the legal questions the papers present). Each one requires separate assessment against the documents that govern the project and the financing alike. What the subcontractor states, or leaves unstated, sets the posture for everything after.

Read the subcontract beside the MCA agreement. The subcontract establishes invoicing requirements, approval conditions, and the payment relationship for the project, while the financing agreement describes purchased receipts, collateral, and asserted collection rights that may or may not reach the balance the general contractor holds.

Preserve the subcontractor correspondence with the funding party as well. A prior modification, payoff discussion, or dispute may bear on the demand now before the project payer. Memories of telephone assurances deserve no weight until the papers confirm them.

Assignment Language and Payment Terms

Whether the funding party may pursue collection from the general contractor turns on assignment and notice provisions, the mechanics of any account stated, and the subcontract terms that condition payment. No general rule about third party contact supplies the answer for a commercial balance, so the inquiry stays inside the executed language.

New York UCC provisions on continuing interests and identifiable proceeds state the framework courts apply to collateral that has been transferred and to proceeds that can still be identified, subject to exceptions the statute sets out. The provision does not determine what a general contractor must do after receiving a payment notice. Counsel should identify the notification and payment rules of the governing jurisdiction.

Contingent terms, retainage, disputed change orders, and asserted deductions all survive the arrival of the notice. An asserted claim against receivables does not make incomplete work complete, whatever extremely urgent language the demand employs, and a balance that remains contingent under the subcontract cannot be converted into settlement money by the urgency of the demand.

You sign the subcontract and then you discover what the payment terms mean under pressure. This should happen with counsel present, before the next application for payment goes out the door.

Project Communications During the Dispute

The general contractor needs an answer before processing the next payment application. Rarely does a payer accept uncertainty, so provide a response coordinated with counsel that identifies the dispute and the peculiar dilemma of the payer.

An equally unexamined agreement to redirect everything may sweep in money beyond the identified obligation. Any proposed payment change should be explicit, written, and limited to the account the review supports.

And the message should stay focused on the project records. Accusations about the character of the funding party add nothing to a question concerning the proper recipient of a payment, and they distract from the invoices, approvals, and applications that decide where the money goes.

Federal collection guidance on the business debt exclusion confirms that consumer restrictions do not supply the rule for commercial contact with a project payer. Other law may still govern the content and purpose of the communication, which counsel should assess from the actor, the documents, and the conduct.

The notice demands an answer, which counsel should draft. What it does not demand is obedience.

If the payer withholds funds while seeking advice, document the amount and the explanation given. The middle of this dispute is where the subcontractor learns which records the project kept. Uncertainty never becomes a direction to hold payment without limit.

Continue to document performance and every agreed change to the work. A financing dispute should not leave gaps in the evidence supporting the invoice itself, since payment follows proof.

The Ledger the Subcontractor Brings to Counsel

Prepare and reconcile a project ledger separating paid invoices, approved amounts awaiting payment, and disputed items, with the evidence for each category attached. Include transfers that may have reached the funding party already, since a redirected payment should not vanish from the accounting because it never touched the operating account.

Distinguish the MCA claim from the total subcontract price. A demand against a particular balance requires reconciliation against the receipts and credits tied to that obligation.

Review completion costs before offering settlement from project proceeds. Money needed to finish the work belongs in the budget, assumptions stated, in order to ensure no proposal trades the ability to complete for the appearance of resolution.

Settlement Terms That Address the Outstanding Notice

Delancey Street offers a review of the financing obligation beside the project cash flow through its merchant cash advance settlement service, beginning with a free initial assessment. The company is a settlement company, not a law firm. Independent counsel handles contested payment instructions and any lawsuit the dispute produces.

Confirm how a proposed engagement treats notices already sent to project payers. A negotiation that lowers installments without addressing those communications leaves the file unresolved, and no provider can ensure acceptance.

The written agreement should state what happens to the notice, who issues any revised instructions, and how payments received during the dispute are credited. Simply retain the executed terms with the updated direction where the accounting staff can find the same version the negotiator holds.

The project needs a reliable payment direction and the subcontractor needs an accurate account. Those two results measure the resolution, long after the argument about who contacted whom has faded.