Indemnification Clause: Meaning in a Merchant Cash Advance
An indemnification clause is a promise to cover the other side's losses and costs, often including attorney fees, if certain things happen. In MCA agreements, it usually requires the merchant to indemnify the funder for losses caused by the merchant's breach or false statements.
What does indemnification clause mean?
Indemnify means to make someone whole. If you break a promise in the contract, or information you gave turns out to be false, and the funder spends money as a result, this clause says you'll reimburse it. That can include legal fees for collecting on the advance.
Why does indemnification clause matter to your business?
Indemnification clauses can make a dispute more expensive. If a funder sues for breach and wins, it can seek its legal costs on top of the balance. Understanding the clause is one more reason to keep the promises in the contract and to communicate early when trouble starts.
Is the clause mutual or one-sided?
Some clauses run both ways. Most MCA agreements are one sided in the funder's favor. It's worth noticing which kind yours is.
What do attorney fee provisions add?
Many MCA agreements pair indemnification with a separate clause making the merchant responsible for the funder's collection costs and attorney fees after a default. Together, they can add significantly to what a dispute costs. That's worth weighing when you think about the risk of a default, and it's another reason early communication pays off.
Where will you see it?
In the general provisions or remedies sections of the merchant agreement, and sometimes repeated in the personal guarantee.
Is this legal advice?
This is general information, not legal advice.
Which terms are related to indemnification clause?
The full list is in the glossary. Owners ask about this in What's the difference between an MCA approval and an offer?.
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.