2026 Best MCA Defense Lawyers in El Paso, TX

Top MCA Defense Firms for El Paso Businesses - 2026

Most Contracts Choose New York Law

For merchant cash advances, most contracts choose New York law. They pick a New York court because the funders live there, they practice there, and they want that familiarity and the home-court advantage that comes with it. But sometimes, when push comes to shove, their own pick backfires on them. A New York court has to enforce New York’s own laws too, even the ones funders hate. One of those laws is the usury law that bans loans that charge over 25 percent annual percentage rate. And if the contract can get recharacterized as a loan, then the whole contract could turn out to be void.

Forum selection clauses are like little arrows that point the lawsuit to a particular forum. For a Texas business, if you’re facing an unconscionable forum selection clause, then the court might not enforce it. Accordingly, retaining the right lawyer could help a merchant change a New York lawsuit into a Texas lawsuit.

Recharacterization Court Cases

In recharacterization court cases where the merchant asserts a claim of recharacterization, the merchant is asking the court to ignore the black and white text of the contract, to consider the intent and the behavior of the funder, and to weigh all of these factors to find out whether, underneath the appearances, the alleged money provided to your business was really a loan disguised as something else, such as a purchase of your future receivables. Specifically, did the payments ever change? If payments fluctuated daily with sales, this can help prove that the contract is the real deal. By contrast, if payments remained absolutely constant for months on end, no matter whether you make a little or a lot, that can help recharacterize as a loan.

Then there is the reconciliation clause, the thing in your contract that lets you ask for lower payments when your revenue drops. Many of these clauses, however, are only in there for show, since they contain loopholes large enough for a battleship to slip through. They call for heavy paperwork to be filed and approved by the funder, and most owners never bother to use it. A useless reconciliation clause can be construed as no reconciliation clause whatsoever. Did you formally ask for a reconciliation under that clause and get ignored or denied? That’s proof the funder had no interest in a real partnership and only wanted the guise of a contract to force the fixed daily amount no matter how the business fared.

Next, look at the end date. A true purchase of receivables has no specific end date. However, if your contract ends on a set day or calls for an estimated 6 months, these are good arguments against it being the real deal. A merchant’s lawyer can calculate out the implied end date.

Then there’s the factor rate: the ratio between what the owner received and what the owner has to repay. Lawyers can convert this to an annual percentage rate. For example, if you receive $100,000 and then repay $135,000, that’s a 1.35 factor rate. Plug in a 6-month duration and you’re looking at about a 70 percent annual percentage rate, well over the New York cap. But sometimes funders charge 1.40 over only a 4-month term. In that case, the APR skyrockets to about 120 percent, which is far beyond the criminal usury level everywhere in the United States.

Another common issue is the Security Agreement or the UCC-1 Form. Most MCA funders take a blanket lien over all of your business assets: the equipment, the inventory, and the general intangibles. When a funder grabs such a wide lien over your collateral, that can raise questions about whether the funder was really interested in buying future receivables, rather than just making a loan against your business secured by your collateral. Texas law requires any funder who sets up automatic ACH debits to have first-priority lien over the merchant’s accounts receivable. Was your UCC filing first in line? If the UCC filing ranks below another creditor and is not in first place, then withdrawals can be barred.

And of course, there’s the personal guarantee. This lets the funder pursue not only the merchant’s business, but the owner’s home, bank accounts, and personal property too. It’s a classic tool of lenders. Many guarantees only require the owner to act truthfully or to cooperate with a funder. Yet aggressive funder behavior to pursue the owner or to pursue the entire loan balance can be used to argue it’s a loan in disguise.

And then there is the confession of judgment. Search for words like “confess” and “cognovit” or “warrant of attorney” in your contract, and you’ll know you found the most dangerous clause. A confession of judgment allows the funder to rush to court and get a judgment without any lawsuit at all, bypassing all the usual checks and balances. Under HB 700 in Texas, confession of judgment clauses are void in post-2025 contracts. New York banned them in 2019 for out-of-state defendants. And having such a one-sided clause in place can make the judge wonder if the deal is one-sided in other ways too.

And then there are the default triggers. If an adverse change occurs, no matter what, or if any other new financing shows up or even if you retain a lawyer, your contract could declare you in default. The existence of a wide-ranging trigger lets the court know that the funder was making a lending decision based on the merits of the whole company, like a loan.

Then there is the waiver of your right to jury trial. A jury trial waiver says that all issues in a lawsuit get decided by a judge alone. That matters because in a tough case, a Texas jury might favor the local merchant, especially if the funder is an outsider. Jury waivers, like forum selection clauses, can even be challenged as unconscionable.

Choosing Your Lawyer

So how do you find the best lawyer for your merchant cash advance in El Paso, Texas? The online directory of the Texas Board of Legal Specialization offers an easy way to search for board-certified lawyers in your specialty and location. Certification in Civil Trial Law requires that a lawyer practice law for at least five years in Texas.

When you are choosing your lawyer, you should be asking how that lawyer intends to charge you. Under Texas ethics rules, the new lawyer should tell you the basis or rate of the fee, preferably in writing, at or soon after the start of representation. Contingency fee agreements in particular must be in writing, must specify the method by which the fee is determined, and specify the expenses for which the client will be responsible.

Finally, go back to your contract and look at the whole picture. Every red flag in the contract is one more defense in your favor. The more you find them, the more likely the funder will avoid litigation altogether and settle for just a fraction of the balance.