MCA Collection FAQs: What Rights Do Merchants Actually Have?
- McDONNELL HOPKINS
- Dec 14, 2025
- 3 min read
Updated: Jan 17
McDONNELL HOPKINS - MCA News Desk Author: Paddy "The Pill" McDonnell
Merchant Cash Advances (MCAs) are often marketed as fast, flexible funding. But when payments become strained or a business experiences cash flow disruption, MCA “collections” can escalate quickly and aggressively. Merchants frequently ask: What rights do we actually have? The answer is more nuanced than most funders suggest. Below are answers to the most common questions merchants ask when facing MCA collection efforts.
1. Is an MCA the same thing as a loan?
No—at least not on paper.
MCAs are typically structured as purchases of future receivables, not loans. In theory, repayment is supposed to fluctuate with business revenue. In practice, many MCA agreements operate more like fixed-repayment loans, which is where disputes arise.
Courts look beyond labels and examine:
Whether repayment is truly contingent on revenue
Whether the funder assumes meaningful risk
Whether the agreement functions as a loan in substance
2. Can an MCA funder collect if my business revenue drops?
It depends on the contract’s reconciliation provisions.
True MCA agreements allow merchants to request downward adjustments when revenue declines. However, many contracts:
Make reconciliation illusory or nearly impossible
Require unrealistic documentation
Penalize merchants for requesting adjustments
If reconciliation is not meaningfully available, courts may view the agreement differently than advertised.
3. Are daily ACH withdrawals always enforceable?
Not automatically.
Daily or weekly ACH debits are common, but enforceability depends on:
Contract structure
Default provisions
Whether withdrawals are fixed or revenue-based
Whether the funder continues debiting despite clear revenue decline
Unilateral debits that ignore business performance may undermine the “receivables purchase” characterization.
4. What happens if I stop paying an MCA?
Stopping payments often triggers:
A declaration of default
Acceleration of the full purchased amount
Collection demands or lawsuits
Confessions of judgment (where permitted)
Personal guaranty enforcement
However, default does not automatically mean the funder is entitled to everything demanded. Courts increasingly scrutinize how and why default was declared.
5. Can MCA funders freeze my bank account?
In some cases, yes but not without limits.
Funders may attempt:
ACH control
Notices to banks
Legal actions seeking restraint or attachment
The legality and scope of these actions depend on jurisdiction, contract language, and procedural compliance. Improper restraints may be challengeable.
6. Are personal guaranties always enforceable?
Personal guaranties are common, but enforceability depends on:
Whether the underlying agreement is valid
Whether the guaranty is properly drafted
Whether default was lawfully declared
If the core agreement is found to function as an unlawful loan or contain predatory terms, guaranty enforcement may be impacted.
7. What about confessions of judgment?
Confessions of judgment (COJs) allow funders to obtain judgments without prior notice or hearing.
Important notes:
Some states restrict or prohibit COJs against in-state merchants
Enforcement may still occur in other jurisdictions
Courts increasingly scrutinize COJs tied to MCA agreements
Merchants should understand where and how a COJ may be filed.
8. Do merchants have any leverage once collections start?
Often, yes.
Leverage may arise from:
Contractual inconsistencies
Defective reconciliation provisions
Fixed repayment characteristics
Usury-equivalent economics
Procedural defects in collection actions
Early analysis can materially change a merchant’s negotiating position.
9. Is MCA collections the same as debt collection?
Not exactly.
MCAs typically involve commercial transactions, not consumer debt. As a result:
Consumer debt laws may not apply
Commercial contract principles govern
Abuse or harassment is still not permitted
Understanding this distinction is critical when responding to collection activity.
10. Should merchants ignore MCA collection notices?
No.
Ignoring notices can worsen outcomes, accelerate defaults, and reduce options.
However, responding without understanding the contract and facts can also be risky.
A structured review of:
Contract terms
Payment history
Revenue performance
Collection tactics
can clarify rights and risks before action is taken.
Final Thoughts
MCA collection actions are not one-size-fits-all. Despite aggressive tactics and firm language, merchants often have more rights and options than they realize especially when agreements do not function as advertised. Understanding those rights begins with objective, forensic analysis, not assumptions.
This article is for informational purposes only and does not constitute legal advice.
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