MCA Lender Sued My Business - What Are My Options

By MercResolution · Published 2026-04-19 · Updated 2026-07-17

If an MCA lender has sued your business, you have options: file an answer, assert usury defenses, negotiate a settlement, or engage professional help. Here is what to do.

If an MCA lender has sued your business, you have several options — but the most important thing to know is that ignoring the lawsuit is not one of them. A default judgment gives the lender immediate enforcement power over your business and personal assets. The good news: businesses that actively respond to MCA lawsuits achieve significantly better outcomes, and the majority of cases settle before trial.

The First 20–30 Days Are Critical

When you receive a summons and complaint from an MCA lender, a clock starts running. In most jurisdictions, you have 20–30 days to file a formal response (called an “answer”). Missing this deadline results in a default judgment — which means the lender wins automatically without proving its case.

Legal Defenses Available in MCA Cases

There are several substantive defenses available in MCA litigation. The right strategy depends on the specific terms of your agreement and the facts of your case — which is why professional analysis is so important at this stage.

Usury Defense

This is the most powerful defense available in MCA cases. If the court determines that your MCA is actually a loan (not a true purchase of receivables), then state usury laws apply. Many MCAs carry effective annual percentage rates of 60% to 400% or higher — far exceeding the usury caps in most states. Courts in Fleetwood Services v. Ram Capital Funding, K9 Bytes v. Arch Capital Funding, and LG Funding v. United Senior Services have recharacterized MCAs as loans and found them usurious. Approximately 42% of usury challenges in MCA cases result in favorable outcomes for the business.

Motion to Dismiss

In some cases, the complaint itself is defective — filed in the wrong jurisdiction, served improperly, or failing to state a valid claim. Forum-selection clauses requiring New York jurisdiction are increasingly challenged when the business has no connection to New York.

UCC Article 9 Challenges

If the funder failed to properly perfect its security interest, failed to provide required notices, or engaged in commercially unreasonable collection practices, these violations can serve as defenses or counterclaims.

Unconscionability

Courts can refuse to enforce contracts that are unconscionably one-sided. MCA agreements with exorbitant rates, one-sided remedies, confession-of-judgment clauses, and broad personal guarantee provisions may be challenged as unconscionable.

Breach of the Implied Covenant of Good Faith

If the funder engaged in predatory practices — refusing reconciliation requests, stacking additional advances knowing the business could not support them, or immediately declaring default for minor payment delays — these actions may constitute a breach of the implied covenant of good faith and fair dealing.

"The strongest defense in an MCA lawsuit isn’t any single legal argument — it’s having a comprehensive strategy that combines multiple pressure points. That’s what turns a lender’s aggressive posture into a willingness to negotiate."

Resolution: How MCA Lawsuits Typically End

Most MCA lawsuits settle before trial. The question is how to position yourself for the best possible outcome — and that positioning starts the moment you receive the complaint.

Once you’ve filed an answer and asserted defenses, the funder’s calculus changes. Litigation is expensive — funders typically spend $15,000–$50,000 prosecuting a case — and the risk of a usury finding makes the outcome uncertain. This creates strong incentive to negotiate. But converting that incentive into an actual settlement at favorable terms requires understanding the funder’s decision-making process, their typical settlement patterns, and the specific leverage points in your case.

This is exactly the kind of situation MercResolution handles every day. We’ve negotiated with virtually every major MCA funder and understand how each one responds to different defense strategies and settlement approaches.

What Happens If You Do Nothing

• The court enters a default judgment for the full amount claimed — plus interest, fees, and attorney costs.
• The funder can immediately garnish your business bank accounts.
• If you signed a personal guarantee, the funder can pursue your personal assets — bank accounts, real property, vehicles.
• A judgment appears on your credit report and remains for up to 20 years in most states (renewable).
• You lose the ability to raise any of the defenses described above.

How MercResolution Can Help

MercResolution works with businesses that have been sued by MCA lenders at every stage — from initial response to final settlement. We negotiate directly with lenders under limited power of attorney, and approximately 95% of our cases are resolved through negotiation without the need for prolonged court proceedings. When litigation is necessary, we coordinate with a network of attorneys experienced in MCA defense, usury challenges, and UCC Article 9 disputes.

Time is critical when you’ve been served with a lawsuit. Every day that passes without a response is a day closer to a default judgment that could have been avoided.