Can I Get an MCA If My Business Is Being Sued?
It depends on what the lawsuit is about and how big it is. A small dispute with a customer rarely stops a file, while a large claim, a suit from a former funder or anything that threatens the business's bank account makes funders cautious or unwilling.
What do funders ask about open cases?
Most merchant agreements ask you to confirm whether there are any lawsuits against the business. Funders also run searches that turn up court filings. When a case appears, they want to know:
- Who is suing and what for.
- How much money is at stake compared with your revenue.
- Whether you have an attorney and what the expected outcome is.
- Whether any court order touches your accounts or your assets.
Which cases tend to be fine?
Everyday disputes are part of running a business. A contractor in a disagreement over a punch list, a landlord dispute that's been settled in principle or a small claims matter with a customer usually don't change much. Funders want the truth and a sense of scale.
Which cases give funders pause?
Suits from another funder draw the most scrutiny, because they signal a prior advance went badly. Large claims that threaten a judgment bigger than several months of deposits are the next concern. A case involving the owners fighting each other over the business is hard, because the funder can't be sure who will control the account next month.
Why be upfront about a lawsuit?
Leaving a lawsuit off your file is a bad bet. Funders find them, and a misstatement in the merchant agreement can give the funder grounds to call a default later. Telling us early lets us send your file only to funders that are comfortable with your situation, and it lets us explain the case in plain terms before they find it on their own. This is general information, not legal advice. For anything about the case itself, talk to your attorney.
What about lawsuits you filed?
If your business is the one suing, that's a different story. A funder mainly wants to know whether the case costs you money in legal fees, distracts the owners or depends on winning to keep the lights on. A collection suit you've filed against a customer who owes you, for instance, rarely worries a funder. A large case that the business needs to win to survive does, because the outcome is out of your control. Share the basic facts and, if you have one, a short note from your attorney on the status. That's usually enough for underwriting.
How can Afterfirst help with this?
Call 877-FUND-654 and give us the short version of the case: who, what and how much. We'll tell you honestly whether it's a problem for funders in our network and, if it isn't, move your file forward with the explanation attached.
What else do owners ask about this?
- Can I get an MCA with a court judgment against my business?
- Can an MCA company sue me?
- Can I get an MCA if I'm behind on rent?
More short answers on this topic are on the your business and your file FAQ, and the funder fit checker runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. 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.