Merchant Cash Advance Lawsuit Defense in New York
A merchant cash advance funder that sues usually files a breach of contract action on the purchase agreement and the personal guaranty. You have a limited window to answer before a default judgment can be entered. Defenses may exist in the agreement itself, depending on how it was written and performed.
- Admitted in New York, New Jersey and Florida
- 139 Fulton Street, Suite 801, Manhattan
- Free consultation
Why did the funder sue instead of just collecting?
Most merchant cash advance agreements are written so that the funder can stop relying on daily or weekly debits the moment those debits fail. When the account no longer clears, the funder generally treats that as a breach and moves to the agreement's enforcement terms. What arrives next is usually a summons and complaint pleading breach of the purchase agreement, breach of the personal guaranty, and often account stated.
Being sued is not the same as owing what the complaint says you owe. The number in the ad damnum clause is the funder's figure, calculated under the funder's reading of its own contract, and it commonly includes fees and default charges that are themselves contestable.
What happens if you do nothing?
If nobody appears for the business or the guarantor, the funder can ask the court to enter a default judgment. A judgment is what turns a lawsuit into an enforcement problem: it is the thing that lets a creditor restrain a bank account, serve an information subpoena, or docket a lien.
Response time in New York is short, and it is not a single number. Under CPLR 320 the period turns on how you were served and where, and the practical deadline is different again in the Civil Court of the City of New York than in Supreme Court. Read the papers you were handed, note the date you received them, and get them in front of a lawyer quickly.
What defenses can a merchant actually raise?
Which defenses are available depends entirely on the agreement and on how the parties behaved under it. In New York MCA litigation, the arguments that come up most often include:
- The agreement is really a loan. New York has no usury ceiling for most corporate borrowers, but a transaction dressed as a purchase of receivables can still be recharacterised. In LG Funding, LLC v. United Senior Properties of Olathe, LLC, 181 A.D.3d 664 (2d Dep't 2020), the Appellate Division weighed three factors: whether the agreement contains a reconciliation provision, whether it has a finite term, and whether the funder has recourse if the merchant files for bankruptcy.
- The reconciliation provision was not honoured. Many agreements promise that the remittance will be adjusted to actual receipts on request. Where that promise exists and was not kept, it may support a defense or a counterclaim.
- The guaranty does not reach this claim. Personal guaranties in MCA paper vary widely. Some are limited to specified breaches rather than to performance of the advance itself.
- Procedural defects. Service, venue, capacity to sue, and the accuracy of the balance pleaded are all fair ground.
None of these is automatic, and none of them is a prediction. They are the questions worth asking about a specific agreement.
What does defending the case involve?
In practice it starts with reading the agreement and the papers together: what was actually signed, what was actually debited, what the funder says it is owed, and whether the two reconcile. From there the work is ordinary civil litigation - an answer with defenses and any counterclaims, discovery aimed at the funder's own accounting, motion practice where the contract supports it, and settlement discussions that are informed by the strength of the defenses rather than by the size of the demand.
Sources
- LG Funding, LLC v United Senior Props. of Olathe, LLC (2020 NY Slip Op 01607) (New York Official Reports)
- CPLR 320: Defendant's appearance (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.
Start here
What arrived?
Three different problems, three different clocks. Start by working out which one you are holding.
- 01A clock is running
A summons and complaint
A lawsuit has been filed against the business, and usually against whoever signed the personal guaranty.
You have a limited period to respond. How long depends on how you were served and which court the case is in, so the papers themselves are the only reliable answer.
Do this first
Write down the date you were handed them, then find the court and index number on the first page.
- 02Already standing
A judgment already entered
A judgment exists in a case you never appeared in — usually a default, or a confession of judgment signed when the advance was taken.
A different problem with a different remedy. A judgment is challenged in its own proceeding rather than defended as a lawsuit, and it keeps its force while that happens.
Do this first
Get the county and index number, then pull the filed papers and read them against your payment history.
- 03Same day
A bank account frozen
Your bank is holding funds against a judgment, usually under a restraining notice served by the creditor's attorney.
The freeze and the judgment behind it are handled on separate tracks, and payroll and rent do not pause for either. This is the one to move on today.
Do this first
Ask the bank for the judgment creditor's name, the county and the index number, in writing. Do not move money between accounts.
Not sure which of these you have? Call 646-396-8050 and read us what the first page says, or send us the details.
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
Can I be sued personally if the advance was to my company?
Often, yes. Most merchant cash advance agreements include a personal guaranty signed by an owner, and funders routinely name that person as a defendant alongside the business. What the guaranty actually covers varies between agreements, and it is worth reading closely rather than assuming it reaches everything the funder claims.
Does answering the complaint make things worse?
No. Appearing in the case preserves your defenses, and it is the step that stops the funder taking a default judgment. Vacating a default afterwards is harder and slower than answering on time, because it becomes its own proceeding rather than a defense in an existing one.
The balance in the complaint looks wrong. Does that matter?
It can. The figure pleaded is the funder's own calculation under its own reading of the agreement, and it frequently includes default fees and charges that are open to challenge. Disputing the amount is a normal part of defending the case.
How long do I have to respond to an MCA lawsuit?
There is no single New York answer deadline. The period turns on how you were served and where, under CPLR 320, and the practical deadline is different again in New York City Civil Court than in Supreme Court. Read the papers you were handed and note the date you received them.
If nobody appears for the business or the guarantor, the funder can ask the court to enter a default judgment. A judgment is what turns a lawsuit into an enforcement problem: it is the thing that lets a creditor restrain a bank account, serve an information subpoena, or docket a lien.
Can a merchant cash advance agreement be treated as a loan?
Sometimes. A transaction dressed as a purchase of receivables can still be recharacterised. In LG Funding v. United Senior Properties, the Appellate Division weighed three factors: whether the agreement contains a reconciliation provision, whether it has a finite term, and whether the funder has recourse if the merchant files for bankruptcy.
None of that is automatic, and none of it is a prediction. Which factors matter depends entirely on the agreement in front of you and on how the parties actually behaved under it.
What is a reconciliation provision, and why does it matter?
It is the clause that makes the arrangement contingent in practice. Many agreements promise that the remittance will be adjusted to actual receipts on request. Where that promise exists and was not kept, it may support a defense or a counterclaim, depending on what was asked for and what the funder did.
Whether a given agreement carries a meaningful reconciliation right, and whether it was honoured when invoked, is often the central factual question in later litigation. The correspondence usually decides it.
What happens after I appear in the case?
It starts with reading the agreement and the papers together: what was signed, what was debited, what the funder says it is owed, and whether those reconcile. From there it is ordinary civil litigation — an answer with defenses, discovery aimed at the funder's accounting, and motion practice where the contract supports it.
Settlement discussions follow, informed by the strength of the defenses rather than by the size of the demand. Understanding what is wrong with a claim is what makes a settlement conversation something other than a repayment plan on the funder's terms.
Free consultation
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.
- 139 Fulton Street, Suite 801, New York.
Prefer to speak now? Call 646-396-8050, or see the office address and email.
Ready to put this in front of the attorney?
Book a consultationTalk it through before the deadline passes.
Bring the summons, the complaint and the agreement you signed. The first conversation is about what the papers actually say and how long you have.
Free consultation