Merchant Cash Advance Agreement: The Clauses to Read

Short answer: A merchant cash advance agreement is written as a sale of your future receivables, not a loan, and its cover page shows only three numbers: what you receive, what you owe back, and the share of receipts the funder takes. What happens when the business cannot keep up is decided in the back pages: the reconciliation clause, the events of default, the remedies, the personal guaranty, the security interest, the forum and arbitration clauses and, in some contracts, a confession of judgment. New York appellate courts weigh three of those terms, reconciliation, a finite term and recourse if the merchant goes bankrupt, to decide whether a contract labeled a sale is really a loan. Read those pages before you sign, and again before you negotiate.

By the Business Debt Adjusters research desk. Reviewed October 21, 2026. Sources for every contract term, statute and decision cited on this page are listed at the end. If you can show us a record that contradicts anything here, call (877) 817-0404 and we will correct it.

This guide is built on primary documents. We read two complete merchant cash advance agreements that public companies filed with the Securities and Exchange Commission: one between Cedar Advance LLC and INVO Bioscience, Inc. dated August 31, 2023, and one between Maison Capital Group Inc and SG Echo LLC and SG Building Blocks Inc dated January 5, 2024. Because they are public, every clause quoted here can be checked. We also read two New York appellate decisions, New York's confession of judgment statute, and the disclosure rules in New York and California.

The cover page: three numbers and what they hide

Both agreements open with a summary box showing the purchase price (what the funder pays you), the receivables purchased amount (what you agree to deliver back) and the specified percentage (the share of your receipts the funder collects until the purchased amount is delivered).

• Cedar Advance and INVO Bioscience: purchase price $515,000.00, purchased amount $746,750.00, specified percentage 20 percent, estimated payment $16,594.00 debited every week. That is a factor rate of about 1.45.
• Maison Capital Group and SG Echo: purchase price $200,000.00, purchased amount $300,000.00, specified percentage 7 percent, estimated payment $12,500.00 per week. That is a factor rate of 1.5, and the agreement's own offer summary states a total dollar cost of $110,000.00.

The net amount line often matters more than the headline. Cedar's net funds after fees were $505,000.00, but the net amount received directly by the merchant was $134,018.00, because an addendum told Cedar to keep up to $370,892.00 of the purchase price to pay off an earlier Cedar agreement dated July 19, 2023. That is what a renewal looks like on paper: most of the new money pays the old balance, and the full new purchased amount is owed on top.

Then read the fee schedule. Cedar's lists a $10,000 charge for underwriting and the ACH program, $50.00 for each returned debit, a $2,500.00 "Blocked Account/Default" fee, and a $195.00 UCC fee, with another $195.00 when the UCC filing is terminated. Fees deducted from the purchase price raise the real cost without changing the factor rate on page one; our guide to factor rate versus APR shows how to convert it. Also compare the cover page with the body: Maison's offer summary says the $12,500 estimated payment is debited "every business day," while its cover page and the weekly cap in Section 3 say $12,500 per week. Raise a mismatch like that in writing before you sign.

The reconciliation clause: the term that makes it a sale

The fixed debit is only an estimate of the percentage; reconciliation is what brings it back in line when revenue falls. Cedar's Section 4 lets the merchant request a reconciliation in writing or by email with bank statements attached, says Cedar will pause debits while it reviews, and states that Cedar "will complete each reconciliation requested by any Merchant within two business days after receipt of proper notice." Maison's Section 4 says that if it collected more than it was entitled to, it "will credit to the Account all amounts to which MCG was not entitled within seven days thereafter," and requires the merchant to hand over the account login and password.

The wording matters in court. In LG Funding, LLC v United Senior Properties of Olathe, LLC (2020), the Appellate Division, Second Department, quoted a clause saying the funder "may, upon [United's] request, adjust the amount of any payment due under this Agreement at [its] sole discretion." Read with the contract's default and bankruptcy terms, the court found the provisions suggested the funder "did not assume the risk" that the merchant would have less revenue than expected. A mandatory reconciliation with a deadline points the other way. See our explainer on MCA reconciliation for how to request one.

"Not a loan": why the label is not the last word

Both agreements say the purchase price "is not intended to be, nor shall it be construed as a loan." Cedar's adds that the merchant "going bankrupt, going out of business, or experiencing a slowdown in business or a delay in collecting Receivables will not on its own without anything more be considered a breach of this Agreement."

The label matters because New York's usury limits apply only to loans. As LG Funding put it, "where there is no loan, there can be no usury, however unconscionable the contract may be." But the court also said a transaction is judged "by its real character, rather than by the name, color, or form which the parties have seen fit to give it," and that courts usually weigh three factors: whether there is a reconciliation provision, whether the agreement has a finite term, and whether there is any recourse should the merchant declare bankruptcy. The court let the merchant raise criminal usury as a defense but dismissed it as a counterclaim.

The First Department applied the same factors in Kapitus Servicing, Inc. v Suburban Waste Services, Inc., decided February 26, 2026. Recourse on bankruptcy through a confession of judgment and personal guaranties "suggests a loan," the court said; but the agreements had no definite term, and it was unclear whether reconciliation was mandatory or at the funder's discretion. Because the factors gave "no definitive answer," whether the agreements were loans was a question of fact for trial. Both agreements we read state that their term "is indefinite," which is the finite term factor written in the funder's favor. How the factors apply to your contract is a question for an attorney who has read it.

Courts read the whole agreement, and they do not always agree. Two New York decisions about different Pearl entities' agreements, one in 2016 and one in 2018, reached different results on whether the specific agreement was usurious; our Pearl Capital record page sets them side by side. Some funders now sell fixed-payment revenue-based financing with no percentage remittance at all, as Specialty Capital describes its product; with those, check whether any adjustment clause exists before you rely on one.

Events of default: the list that turns a slowdown into a lawsuit

Cedar's Section 30 lists four events of default, including any merchant causing a Cedar debit "to be blocked or stopped" without advance written notice and an alternative way to collect. Maison's Section 34 lists 19, including violating any term of the agreement, failing to report a material change in finances or ownership, blocking or stopping a debit, two or more debits returned for insufficient funds without advance written notice, and defaulting under "any other agreement with MCG."

Neither lists bankruptcy itself as a default, but both require the merchant to represent that it is not contemplating a filing, and Maison requires written notice "at least one day prior to any filing under Title 11." In LG Funding, by contrast, bankruptcy was an event of default, and the court treated that as a sign of a loan.

The most common trigger in practice is the one merchants reach for first: stopping the debits or moving to a new account. In both agreements blocking or stopping a debit is a listed default, Maison's list also includes changing the account without its consent, and in Cedar's a default also triggers the $2,500.00 fee. Read our guides on stopping daily ACH withdrawals and what happens after a default before doing either.

If a default has already turned into a suit, our guide to a merchant cash advance lawsuit covers what happens next, the deadline to respond, and where settlement fits.

Remedies: acceleration, guaranty, collateral and fees

In both agreements the first remedy is acceleration: "The full uncollected Receivables Purchased Amount plus all fees due under this Agreement may become due and payable in full immediately." Cedar's list continues with enforcing the guarantee and its security interest, litigation or arbitration, debiting the merchant's accounts "wherever situated," and notifying the merchant's card processor.

Two clauses can add more than the original fees did. Cedar's Section 31 lets it "elect that Merchant(s) be required to pay to CEDAR 25% of the unpaid balance of the Receivables Purchased Amount as liquidated damages" for collection expenses. Maison's Section 43 makes the merchant and guarantor pay its enforcement costs, including attorney fees "which may include a contingency fee of up to 40% of the amount claimed." Both belong on the list of terms to address directly in any settlement discussion.

The personal guaranty

Maison's guarantee is titled "Personal Guarantee of Performance" and says each guarantor "guarantees each Merchant's performance of all of the representations, warranties, and covenants" in the agreement. The guaranty in LG Funding was described the same way. The word "performance" ties the owner's exposure to the merchant's promises, such as keeping the designated account and not blocking debits, which is one more reason the events of default matter. Whether a guaranty can be enforced against you is a legal question; if you signed one and the business is behind, talk to an attorney before you change anything about the account.

Confession of judgment, and where New York lets one be filed

A confession of judgment is a signed affidavit that lets a creditor obtain a judgment without a lawsuit. Neither SEC exhibit contains one, but the contracts in LG Funding and the 2026 Kapitus case did, triggered by the merchant's bankruptcy.

New York's statute, CPLR 3218, requires the affidavit to state "the county where the defendant resides," and allows it to be filed "only with the clerk of the county where the defendant's affidavit stated that the defendant resided when it was executed or where the defendant resided at the time of filing." It adds that "a non-natural person resides in any county where it has a place of business." If your agreement includes a confession and your business has no place of business in New York, ask an attorney how this applies. Our page on confessions of judgment in MCAs has more.

Governing law, forum, arbitration and the waivers

• Cedar: Florida law; suits "shall be instituted in any state court sitting in the State of Florida," although Cedar may sue elsewhere; Cedar has the right to request arbitration.
• Maison: New York law; suits brought, if Maison elects, "in any court sitting in the States of New York or Connecticut"; any party may elect arbitration, which "must be conducted in the Counties of Nassau, New York, Queens, or Kings in the State of New York."
• Both: a jury trial waiver, a class action waiver, a counterclaim waiver ("each Merchant and each Guarantor will not be permitted to interpose any counterclaim") and a one-year contractual limit on claims against the funder.

Put together, a merchant in Texas who signed the Maison agreement agreed that, if Maison chose, it would defend in New York or Connecticut, without a jury or a counterclaim, and bring any claim of its own within a year. Whether each waiver holds up is for a court to decide; see can MCA companies sue you for how these suits usually begin.

The ACH authorization and the security interest

Cedar's ACH authorization "shall be irrevocable as to each Merchant absent CEDAR's written consent until the Receivables Purchased Amount has been paid in full," and Maison's is "irrevocable absent MCG's written consent." Maison's Section 33 then secures the merchant's obligations "under this Agreement and any future agreement with MCG" with collateral including all accounts, receivables, equipment, general intangibles and inventory. That is the basis for the UCC-1 financing statement on a lien search, and "any future agreement" means a renewal can sit under the same filing. Our guide to UCC liens from an MCA covers how to find and remove one.

The disclosure you may have been owed

New York. The Commercial Finance Disclosure Law, implemented in 23 NYCRR Part 600, covers sales-based financing, including merchant cash advances, for offers of $2.5 million or less, when the recipient's business "is principally directed or managed from the state of New York." It took effect February 1, 2023, with compliance required from August 1, 2023. The required table includes the funding provided, an "Estimated Annual Percentage Rate (APR)", the finance charge and the estimated total payment amount, and on a renewal it must say whether the new advance pays unpaid charges on the old one, which the rule calls "double dipping."

California. Financial Code section 22802 requires the total amount of funds provided, the total dollar cost, the term or estimated term, the payment method, frequency and amount, the prepayment policies, and "the total cost of the financing expressed as an annualized rate," signed by the recipient before the deal closes. It applies to offers of $500,000 or less.

If your business is in one of these states, look for that disclosure in your file. Its absence is a point to raise with counsel.

Frequently asked questions

What is a merchant cash advance agreement?

It is a contract in which a funder pays a business a lump sum, the purchase price, in exchange for a larger amount of its future receipts, the purchased amount, collected as a percentage of receipts or as an estimated daily or weekly debit. The agreements we reviewed state that the purchase price is not a loan and include terms on reconciliation, default, remedies, guaranties, collateral and where disputes are resolved.

Is a merchant cash advance agreement a loan?

The agreement will say it is not. New York courts look at substance, usually weighing whether there is a reconciliation provision, whether the agreement has a finite term and whether the funder has recourse if the merchant goes bankrupt. In February 2026 the First Department held that when those factors point in different directions, the question is one of fact for trial. Only an attorney who has read your agreement can tell you how a court is likely to view it.

Can a merchant cash advance agreement be negotiated?

Before signing, the fees, the estimated payment and the default charges are the terms most worth asking about. After a default, a funder and a merchant can still agree to settle the balance, and default charges such as a 25 percent liquidated damages clause or a contingency attorney fee are part of what gets negotiated.

What happens if I stop paying under an MCA agreement?

In both agreements we reviewed, blocking or stopping the funder's debit is a listed event of default. Default can make the full remaining purchased amount due immediately, with fees, and lets the funder enforce the guaranty and its security interest and sue or arbitrate in the forum named in the contract. Do not stop the debits or move the account without advice.

Does a merchant cash advance agreement include a personal guaranty?

Many do. In the Maison agreement and in the contract in the LG Funding case, the owners signed a personal guaranty of performance covering the business's representations, warranties and covenants. Check the signature pages to see who signed.

Do I need an attorney to review an MCA agreement?

If you are about to sign a large advance, are facing a default, or have been sued, yes. Whether forum clauses, waivers, guaranties and confessions of judgment can be enforced depends on the facts and the state. A debt settlement firm can negotiate a balance, but it cannot give you legal advice.

If the agreement is signed and the payments are the problem

If the debits are taking more than the business reliably brings in, the agreement is the map for what comes next. The reconciliation clause tells you what you can ask for, the events of default tell you what not to do, the remedies show the funder's maximum claim, and the guaranty, forum and confession clauses show where the risk sits for you personally. Business Debt Adjusters reviews the agreement, the payment history and the bank activity together and tells you plainly whether a settlement is realistic before any funder is contacted. Start with a free consultation, and if you have been sued or served, speak to an attorney as well.

Sources

• Standard Merchant Cash Advance Agreement, Cedar Advance LLC and INVO Bioscience, Inc., August 31, 2023, Exhibit 10.1, SEC EDGAR. Cover page, fees, Sections 4 to 6, 14, 16, 30, 31, 35 to 38, 41 and 42, addenda. Read October 21, 2026.
• Standard Merchant Cash Advance Agreement, Maison Capital Group Inc and SG Echo LLC / SG Building Blocks Inc, January 5, 2024, Exhibit 10.1, SEC EDGAR. Offer summary, cover page, Sections 3, 4, 6, 7, 15, 17, 33, 34, 36, 40 to 43, 46 and 48, guarantee. Read October 21, 2026.
• LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664 (2d Dept 2020), New York State Law Reporting Bureau.
• Kapitus Servicing, Inc. v Suburban Waste Servs., Inc., 246 AD3d 661 (1st Dept 2026), New York State Law Reporting Bureau.
• CPLR 3218, Judgment by confession, New York State Senate Open Legislation. Read October 21, 2026.
• 23 NYCRR Part 600, final regulation text, New York State Department of Financial Services. Sections 600.1, 600.6 and 600.24.
• NYDFS Finalizes Commercial Financing Disclosure Regulation, Greenberg Traurig, February 2023. Effective and compliance dates, $2.5 million threshold.
• California Financial Code section 22802 and section 22800(n), California Legislative Information. Read October 21, 2026.

This article summarizes two merchant cash advance agreements filed publicly with the Securities and Exchange Commission, published New York appellate decisions, and state statutes and regulations as of October 21, 2026. The agreements are examples only; your contract may differ, and the outcome of any dispute depends on its facts and the law of the state involved. It is not legal advice. Business Debt Adjusters is not affiliated with Cedar Advance LLC, Maison Capital Group Inc, INVO Bioscience, Inc. or SG Echo LLC, and no finding about any of them is asserted here.