How to Read an MCA Agreement
6 Clauses Courts Quote and 1 Term You Must Demand in Writing

Fifteen minutes with the right clauses tells the owner more than an hour with the sales presentation.

The agreement decides what happens when revenue falls, who pays when the business cannot, and which papers the funder reaches for first. New York courts have quoted only some provisions of these agreements at length. Start with the six clauses judges quote, then demand the seventh group in writing, since no published opinion supplies standard language.

The seven clauses below follow that order for counsel to test against the signed paper itself.

Price and Rate: What the Funder Advanced and What It Claims

In LG Funding, LLC v. United Senior Properties of Olathe, LLC, the agreement stated that the merchant sold future receivables for a purchase price of $100,990, with a purchased amount of $129,267.20. The two figures divide to a multiple near 1.28, a label the opinions never use, so compute the economics from the signed figures.

The first clause is the purchase amount: funds advanced beside the total to be collected, with the gap between them in plain figures. The second clause is the rate mechanism: the specified percentage of revenues, the daily remittance figure, and any cap on weekly collection. One concurrence described merchants who agreed to pay $360,000 at $3,500 per day as a purported twenty five percent share, while another record showed a bizarre blank in place of the specified percentage. Never does a blank space favor the party who signed beneath it.

Before the owner reaches for a calculator, before counsel opens the payment ledger, both should confirm and record which figures the agreement itself contains. You sign the paper and then you learn what the paper costs.

Reconciliation: The Clause Courts Weigh Most

New York courts evaluate whether repayment is absolute in substance, weighing reconciliation alongside finite term and bankruptcy recourse. The existence of a clause alone concludes nothing about enforceability.

The third clause is reconciliation: who may request it, what proof it requires, and what remedy follows. In the LG agreement the funder could adjust payments upon request at its sole discretion, and the court held that provision, together with absolute repayment terms, stated a triable usury defense. A later majority found two reconciliation provisions with retroactive and prospective effect upon request with proof, holding them not illusory where the agreement gave no sole discretion over the adjustment, as explained in the later appellate discussion with dissent. The concurrence proposed an illusory in practice test for lenders who demand endless documentation while continuing to debit. That test is the concurrence alone, not the majority. One trial court decision on a full record called mandatory reconciliation a total sham where it never occurred and held permissive reconciliation on request insufficient there. Those findings bind those parties on that record (the docket runs to hundreds of pages, so summary characterizations deserve suspicion).

The owner should ensure the clause is read for what it permits. Simply compare the adjustment language with the debit authorization. Collect the notices and preserve every refusal with its stated reasons. What the business invokes, or neglects to invoke, in writing will govern the next dispute.

Default, Acceleration, and the Confession

The fourth clause lists the events of default and their price in acceleration language.

In the LG agreement, default made the full uncollected purchased amount plus all fees, including reasonable attorneys' fees, immediately due, and a written admission of inability to pay or bankruptcy counted among the triggers. Another record treated missed payments as default, with any encumbrance accelerating the full amount and representations that receivables stood free and clear. Read the default clause beside the reconciliation clause, since the two together decide whether a slow month brings an adjustment or a case against the merchant.

The fifth clause is the confession history and its current procedure. The LG papers required delivery of a confession upon bankruptcy. A trial court later treated confessions procured through false affidavits as fraud on that record. Federal enforcers alleged that settling funders had weaponized confessions in order to pursue personal assets, and the resulting order required dismissal or satisfaction of customer cases with filed lien terminations, per the federal enforcement settlement announcement. Current New York procedure requires a sworn affidavit stating the sum and county of residence within filing limits, under the confession of judgment statute, which states a procedure rather than a ban. Texas voids confession provisions in covered contracts while creating no private right of action, under the enacted Texas commercial financing law. An extremely short cure period with extremely large consequences waits beside the acceleration language.

The Guaranty and the Terms No Opinion Quotes

Most owners meet the guaranty for the first time in the demand letter. I understand why the funding rush buries it beneath more urgent paper.

The sixth clause is the personal guaranty: who signed, what stands guaranteed, and when the funder may enforce it. The LG guarantors promised performance and faced enforcement upon bankruptcy. A later majority treated the guaranty claim as dependent on the contract claim. One concurrence called the guaranty separate and distinct, but that reasoning belongs to the concurrence alone, which is, if we are being precise, commentary rather than law. Another record showed guaranties framed as performance and enforced through confessions, with federal allegations of contrary representations at signing. Those allegations were neither admitted nor denied, which limits what any reader should conclude.

The seventh group covers the terms no captured opinion quotes at useful length: UCC filing authorization, assignment and lockbox mechanics, and notice and cure. The captured material proves funders file UCC liens without revealing any authorization language, describes a daily sweep without supplying any lockbox agreement, and quotes a debit authorization that governs bank debits. No standard language for these provisions emerged from the sources at hand. Demand each term in writing from the executed paper for counsel to review and analyze before signing or responding. Any remark to the collector about these provisions, even casually, can narrow the options later. The docket in the next dispute will contain the agreement the owner signed. The agreement remains.

Read in Fifteen Minutes, Then Hand to Counsel

Delancey Street offers a confidential initial review of MCA agreement questions through its business debt settlement service. The company is a settlement company and not a law firm, with legal analysis through independently licensed counsel on confirmed scope and fees. Resist the urge to treat a fast reading as a complete one.

The owner should ensure the seven clauses reach that review marked and copied. Counsel should examine the figures, test the triggers, and prepare a posture the business can hold. Agreements receive a fast reading and a slow signature, or the reverse, and the paper the owner signs decides most of what follows.