MCA Debt Attorney: 6 Points Where Legal Review Changes the Settlement Number

A settlement number is a forecast of what a case would produce if nobody settled, discounted by the cost and the time of finding out. Legal review changes the number by changing the forecast, and only at the points where a defense would actually alter what a court might do.

Six such points recur in merchant cash advance files. Some move the number in the merchant's favor. One or two, on an honest reading, move it the other way, and an MCA debt attorney who reports only the first kind has not reviewed the file so much as decorated it.

1. The Risk That the Advance Was a Loan Is a Risk to Principal, Not Only to Profit

New York's highest court settled the stakes in 2021. In Adar Bays, LLC v. GeneSYS ID, the Court of Appeals held that a corporation may raise criminal usury, meaning interest above the 25 percent annual rate in Penal Law 190.40, and that a loan proven to exceed it is void, with both principal and interest uncollectable. The borrower still carries the burden of proving it.

That defense reaches a merchant cash advance only if the advance is found to be a loan, and the courts have gone both ways. The Second Department in LG Funding (2020) let a usury defense proceed where the funder could adjust payments at its "sole discretion" and bankruptcy triggered a confession of judgment. The Fourth Department in Bridge Funding Cap v. SimonExpress Pizza (2025) held an agreement with mandatory reconciliation, no finite term, and no bankruptcy recourse to be a purchase as a matter of law.

Consider a hypothetical, offered only for its arithmetic. A funder advances $60,000 against a purchased amount of $84,000 and has collected $51,000 when payments stop. Its contract claim is the $33,000 remainder plus whatever fees the agreement allows. If the transaction is found to be a criminally usurious loan, the remainder is not reduced to a lawful rate; it becomes uncollectable. The funder is therefore not weighing $33,000 against some smaller figure. It is weighing $33,000 against nothing, and the terms of its own contract decide how plausible nothing is.

The funder prices the clause it wrote. The attorney's job is to read that clause before the funder does the pricing for both sides.

No one can assign honest odds to a characterization fight in the abstract. The attorney can say which side of the LG and Bridge line the agreement falls on, and that assessment, more than any appeal to hardship, is what moves a funder's authority to accept less.

2. A Defective Confession Turns a Judgment Back Into a Claim

A funder holding a confessed judgment negotiates from the position of a creditor who has already won. If the confession can be undone, it negotiates as a plaintiff who has not yet sued.

The confession statute has permitted New York filing, since its 2019 amendment, only in a county where the defendant resided at signing or at filing, with a business counted as resident wherever it has a place of business. CPLR 5015(a) separately allows relief from a judgment for "fraud, misrepresentation, or other misconduct of an adverse party" and for lack of jurisdiction. An attorney who finds a filing in the wrong county, or an affidavit whose sworn facts do not match the account, has changed which of those two negotiations is taking place.

3. A Refused Reconciliation Request Is Evidence, Not a Grievance

Owners describe denied reconciliation requests as unfairness. Courts have treated them as proof. In February 2026 the First Department, affirming the Attorney General's case against Richmond Capital Group, pointed out that "no reconciliation was performed in practice" and that there was evidence reconciliation requests "were denied," in holding that the agreements there were loans. Dated requests and refusals are what give the first point its weight.

4. Overcollection Is Arithmetic, and Arithmetic Does Not Negotiate

Before anyone argues about what the funder is owed, someone should establish what it has received. The two figures are often further apart than either party's spreadsheet suggests.

Take the same hypothetical. The agreement says $84,000. The bank statements, once every debit is marked, show $88,500 withdrawn, because debits continued for several weeks after the purchased amount was reached and a renewal was netted against a balance that had already been paid. On that arithmetic the claim is not $33,000. It is a refund running the other way. (The obvious rejoinder, that the renewal agreement authorized the netting, is a question about the renewal agreement, which is why the attorney reads it.)

The funder's own records can fail it as well. In Bridge, the funder won on characterization and lost its summary judgment motion anyway, because its manager's affidavit stated one damages figure and its verified complaint another, and nobody explained the difference. A funder that cannot prove its number cannot collect it, and a funder that knows this settles differently.

5. The Guaranty May Promise Less Than the Funder Demands

MCA guaranties are often written as guaranties of performance: in LG, of "all the representations, warranties, and covenants" of the business. Whether such a promise makes the owner liable for the whole unpaid balance, or only for losses caused by a breach of those covenants, depends on the words, and the answer can differ from the funder's demand letter.

The same point can cut against the owner. Under the automatic stay, a company's bankruptcy petition protects the company; it does not ordinarily stop a suit on the guaranty. An attorney who reads the guaranty narrowly should also tell the owner what it still reaches. That, too, changes the number, though not in the direction anyone hoped.

6. Litigation Costs Both Sides, and Only One Side Tends to Count It

A defended case requires the funder to prove each element of its claim, produce records, and perhaps answer an expert on the effective rate. The merchant bears costs as well, which is the point most often left out of the calculation, and a review that finds the funder's position strong should say so and recommend paying for certainty. The comparison is between two budgets, not between a budget and a hope.

What a Review Leaves Behind

Delancey Street works on business debt as a negotiator. Not a law firm, it does not render the legal opinions described above. It begins with a confidential review, free of charge, of the agreements and the account history, and it works alongside separately licensed attorneys when the questions become legal ones. For a business already sued, holding a confessed judgment, or facing a guaranty claim, the first conversation belongs with an MCA debt attorney. For a business that is not yet there, Delancey Street can assess whether a negotiated resolution is realistic, without promising that any funder will accept one.

Either way the number that emerges should be traceable to something in the file. A figure that cannot be traced was not reviewed; it was guessed at, however politely.