Frozen Account: Meaning in a Merchant Cash Advance
A frozen account is a bank account the bank has blocked from withdrawals and payments. Accounts get frozen because of a court order, a levy, a tax action, suspected fraud or the bank's own review.
What does frozen account mean?
Deposits often still come in, but nothing goes out. Checks bounce, debit cards stop working and scheduled payments return. With a merchant cash advance, a freeze usually follows a court judgment the funder obtained after a default, sometimes through a confession of judgment in states that still allow them. The bank freezes the account to comply with a restraining notice or levy.
Why does frozen account matter to your business?
A frozen operating account stops payroll, rent and supplier payments at once. Businesses usually learn about it from a declined card or a phone call from the bank, not from the funder. The first job is to find out who ordered the freeze and on what basis, because that decides how to respond and how fast.
What are the first steps with a frozen account?
- Ask the bank for a copy of the order and the name of the party that served it.
- Call a business attorney the same day. Deadlines to challenge a levy are short.
- Keep records of every payment you made to the funder.
Where will you see it?
In a notice from your bank, sometimes with a copy of the legal paper served on it. In your online banking, as a hold on the entire balance. In court documents if a judgment is involved.
Is this legal advice?
This is general information, not legal advice. How a freeze works, and how to lift it, depends on the state and the kind of order.
Which terms are related to frozen account?
The full list is in the glossary. Owners ask about this in What does an MCA payment look like on my bank statement?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.