Reading the Guaranty in an Indiana Merchant Cash Advance Case
An Indiana owner sued personally on a merchant cash advance is being sued on one page of the agreement, not the whole of it. Guaranties differ substantially in what triggers them and what they cover, and the difference between two versions can be the difference between two outcomes.
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You are being sued on one page
When an Indiana owner is named personally in a merchant cash advance action, the claim against the person is not the advance. It is a guarantee, and it usually occupies a single short block of the agreement.
Short does not mean simple, and it does not mean standard. Two guaranties can run to the same length, use much of the same vocabulary, and produce entirely different answers to the only question that matters: does this person owe this money because the business did not deliver?
So this page is a reading guide rather than an argument.
The four things to find
1. What triggers it
Look for the condition. Some guaranties are engaged by any failure of the business to deliver the purchased amount. Others list specific events — diverting the receipts the funder bought, changing the depositing bank without consent, closing or selling the business, taking further financing against the same receivables.
If the list is closed and nothing on it happened, that is the defense, and it is a defense about facts rather than about law.
2. What it covers once triggered
A guarantee can be of the whole purchased amount, or of a stated cap, or of the funder's losses, or of costs and fees as well as principal. The ceiling is frequently different from the number in the complaint.
3. What it waives
Guaranties commonly waive notice, demand, presentment, and the requirement that the creditor pursue the business first. Those waivers are the reason a guarantor can be sued at the same time as the company rather than after it, and the reason nobody was obliged to warn the person before filing.
4. Whether it survives the business
This is the one owners assume and should check. Some guaranties expressly continue after the company dissolves or stops trading. Others are silent, and silence is argued about.
Performance versus conduct
The distinction worth holding onto is between a guarantee of performance and a guarantee against conduct.
A performance guarantee puts the signer behind the outcome: the purchased amount was not delivered, therefore the guarantor owes it. A conduct guarantee puts the signer behind their own behaviour: if they diverted the receipts or shut the doors, they owe; if the business simply did worse than anyone hoped, they may not.
An honest business failure is the commonest fact pattern in this area, and under a conduct guarantee it is a materially better position than most owners assume they are in. Under a performance guarantee it is not. The document decides which.
Why the governing law is New York
GOL § 5-1401 permits parties to choose New York law for transactions covering at least $250,000 whether or not the deal is otherwise connected to the state, and these agreements choose it as a matter of routine. So the guaranty is construed under New York law, in a New York court, which is the practical reason an Indiana owner needs New York counsel to argue about an Indiana signature.
Your deadline is yours
CPLR § 320 gives each defendant twenty days after service of the summons to appear — by answer, by notice of appearance, or by a motion extending the time to answer — with longer periods in defined circumstances including particular methods of service.
Two defendants, two deadlines, counted separately. Where the guarantor's passes, CPLR § 3215 lets the plaintiff seek a default judgment, with the clerk able to enter one for a sum certain on the requisite proof. A judgment against a person reaches personal assets, which is why this is the deadline to protect first.
What to do first, from Indiana
- Separate the guaranty from the agreement. Physically. Put it on its own page and read only that.
- Mark the trigger, the cap, the waivers and the survival clause. Four highlights.
- Write down what actually happened to the business, in dates. That is what gets measured against the trigger.
- Appear on your own deadline, regardless of what the company is doing.
How an MCA lawsuit is defended covers the case after appearances. A restrained account and a confession of judgment cover enforcement.
Sources
- N.Y. CPLR § 320, Defendant's appearance (New York State Senate)
- N.Y. General Obligations Law § 5-1401, Choice of law (New York State Senate)
- N.Y. CPLR § 3215, Default judgment (New York State Senate)
Every case turns on its own agreement, facts and procedural posture. Nothing on this site is legal advice or a prediction of any outcome.
Our firm
Who handles the case
Migir Ilganayev, Esq. founded Ilganayev Law Firm, PLLC in 2017, the same year he was admitted in New York. He is also admitted in New Jersey and Florida.
- Practising since
- 2017
- Admitted in
- New York, New Jersey and Florida
- Law school
- New York Law School
- Appears in
- State and federal courts
- B.A., Political Science and Philosophy of Law, Brooklyn College, City University of New York, 2012
- J.D., New York Law School, 2015
- Judicial intern to the Hon. Martin M. Solomon, Kings County Supreme Court
- Public Service Certificate for pro bono service
How it works
How your case moves
This is the shape of a defended merchant cash advance lawsuit. A judgment already entered, or an account already frozen, runs on its own track alongside it.
Every case turns on its own agreement, facts and procedural posture. Nothing on this site is legal advice or a prediction of any outcome.
FAQ
Questions people ask at this stage
What should I look for in my guaranty?
Four things: what event triggers it, what amount it covers once triggered, whether it waives notice or demand, and whether it survives the business ceasing to trade. Each of those is a separate sentence somewhere, and each changes what the claim is worth.
Guaranties in these agreements are often short, which makes them quick to read and easy to skim past. The brevity is not a sign that there is nothing in them.
Is a guaranty of performance different from a limited one?
Substantially. A performance guarantee puts the guarantor behind delivery of the whole purchased amount. A limited guarantee is triggered only by listed conduct, such as diverting the purchased receipts or shutting the business down, and does not reach ordinary shortfall.
The business genuinely failed. Does that help?
It depends entirely on the wording. Some guaranties are drafted to exclude a good-faith business failure, reaching only deliberate conduct such as diverting receipts. Others reach any shortfall however it arose. This is the one question where reading the actual document matters more than any general rule.
Do I have to respond separately from the company?
Yes. Each defendant appears for itself, and New York gives each twenty days from its own service, with longer periods in defined circumstances. A company response does not cover its guarantor, and the guarantor default is the more dangerous one.
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Book a consultation
Pick a time that suits you, then a few short questions about what arrived and when. It takes about two minutes, and the consultation is free.
- The call is with Migir Ilganayev directly, not an intake desk.
- He asks what arrived and when.
- He reads the agreement and the payment history against each other.
- He tells you where you stand and what the options are.
- The consultation is free. Fees for representation are discussed on the call and depend on the matter.
- No obligation. Sending it does not create an attorney-client relationship.
- If it is urgent, calling is faster than writing.
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Book a consultationWhat did you personally promise?
Bring the guaranty, which is usually its own page near the back. Guaranties are not uniform, and reading yours is cheaper than assuming the worst one.
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