Can You Sell Your Business With a Merchant Cash Advance in Practice
5 Issues Before Closing

The purchase price does not extinguish the advance. A buyer payment, a signed purchase agreement, even a closed escrow leaves the funding company claim where it was until the documents that release it are executed and delivered.

Sales involving an advance close on two tracks: the transfer of the business and the release of the claims. The first track gets the attention. The second decides whether the seller is actually free.

1. Determine What the Sale Actually Transfers

An asset sale and a transfer of ownership interests raise different contractual questions, and counsel should examine the advance agreement together with the transaction documents before anyone assumes the obligation stays with the seller or passes to the buyer (our count of mishandled assumptions is informal, the pattern behind them is not).

The buyer agreed to assume the obligation. The funder never agreed to release the seller.

Simply provide the complete advance documents to the professionals handling the sale. Look for provisions addressing transfers, changes in control, receipts, and default, and remember that the existence of a clause establishes the issue rather than its answer. An extremely ordinary amendment can decide who receives the proceeds.

Rarely does a closing adjust for a lien nobody ordered a search to find.

2. Examine Collateral and Proceeds

New York UCC section 9-315 generally provides that a security interest continues in collateral after disposition unless the secured party authorized a free and clear disposition, and it can attach to identifiable proceeds. The governing jurisdiction and the particular transaction still require legal review, since the statute states a starting point rather than a result.

That rule does not establish that every advance carries a valid perfected lien (which the broker will describe as routine paperwork hardly worth delaying the closing to verify). Inspect and confirm the agreement, the filings, priority, the collateral description, and the applicable exceptions before promising proceeds to anyone.

The blanket lien is drafted in order to reach after acquired property and proceeds alike. The UCC filing sits in the public record the way a fence sits across a field: unnoticed until someone tries to cross. Most brokers treat lien searches as paperwork. The search is the transaction.

And no payoff should travel outside the closing process. Identify the amount, the recipient, the effective date, and the evidence required afterward, because an extremely brief authorization letter cannot substitute for written instructions the closing professionals can enforce.

A buyer who pays the seller has paid the seller. Only the funder can release the funder claim.

You sign the purchase agreement and then you discover what the liens mean. Prepare an asset schedule that separates owned property from leased equipment and from property belonging to another party, and ask how the agreement treats receivables collected before and after closing.

Raise the issue early enough that a missing authorization does not become a dispute on the day the buyer intends to fund.

3. Separate the Company Exit From the Owner Release

Six months after the closing dinner, the owner learns which obligations attended as guests. A sale can change ownership while leaving a personal guaranty or another undertaking exactly where it was.

Owners celebrate the closing before the releases arrive. I understand the impulse.

A buyer promise to pay allocates the burden between buyer and seller without binding the funding party unless that party agrees. Ask counsel to identify what remains with each person after closing, and ensure any necessary guarantor release is addressed by the party with authority to grant it, because silence on that point leaves the owner with an unfinished exit and...

Whether buyer financing treats the payoff as a closing condition varies by lender, and I cannot answer it from this desk.

4. Reconcile the Closing Figures

Keep the price, the transaction costs, the creditor payoffs, and the remaining proceeds in one schedule. Update the figures when the closing date moves. No disbursement instruction should change by telephone, even casually, in the final week.

Retain payoff confirmations and executed documents. The tax adviser should review the transaction, since the IRS explains that canceled debt can have tax consequences subject to exceptions and exclusions.

The gross price was only the first line.

5. Consider Delancey Street for the MCA Negotiation

Both tracks must arrive together. Name the date by which the creditor resolution must be documented for the sale to proceed, and treat a verbal expectation of acceptance as what it is: conversation, with the closing condition still open.

The buyer, the seller, and the funding party may each mean something different by release: collateral, account satisfaction, an individual guarantee. In most files we have reviewed, that single word carries three definitions into the same closing. Counsel should fix the intended scope in the documents.

Ask what happens if the sale fails after a settlement is signed. An extremely patient buyer can still withdraw, and a payment obligation tied to expected proceeds then becomes difficult. Identify and preserve the contingency before the seller commits to a date, including the amounts the seller pays, or retains, if the transaction does not close.

Delancey Street offers an MCA focused settlement review and a free confidential initial conversation. It describes coordination with independently licensed counsel for legal matters. Delancey itself is not a law firm or a substitute for the professionals handling the sale.

Its review can assess whether negotiated terms fit the planned closing. Settle and close each account on its own papers, confirm eligibility, fees, timing, and who communicates with the funding party, and ensure the proposed reduction stays contingent until the necessary agreement exists.

Resist the urge to promise a closing date around an offer the funder has not accepted. The reviewer will need the advance agreement, the proposed purchase terms, and a current accounting of every claim the sale is expected to resolve. A workable exit names the assets transferred, the claims addressed, and the obligations that survive, and the escrow record should let the owner explain each of those long after the file is put away.