The merchant cash advance is represented as a purchase of future business receipts, not a loan. The business owner will usually see the funder collecting funds via daily or weekly automatic bank account debits. The contracts almost always provide for New York law and the New York courts. An honest lawyer will tell you that whether a lawyer is needed “depends.” If you are being sued, the lawyer that you need is probably someone who can go into a court in New York. A lawyer in Indiana is critical once the judgment is being brought into Indiana or in a bankruptcy here.
Indiana Has No Commercial Financing Disclosure Law
Indiana has no commercial financing disclosure law. As of September 2026, eleven states have disclosure statutes that reach merchant cash advances, including New York, California, Virginia, Florida, Texas, and Missouri. Indiana is not among them. In those states, funders must show an estimated annual rate or similar cost figures before signing. An Indiana merchant gets no comparable statutory disclosure, so the real cost of an advance often has to be calculated afterward from the contract and the bank statements. Indiana also requires no license to operate as an MCA funder or broker.
Indiana sets no general interest ceiling for business-purpose loans. The 8 percent rate in Indiana Code 24-4.6-1 applies only when the parties agreed on no rate, and as a cap on judgment interest. Indiana’s real limit is criminal. Under Indiana Code 35-45-7-2, knowingly charging more than twice the 36 percent consumer-code rate on a loan is loansharking, a Level 6 felony. The Indiana Department of Financial Institutions treats the line as 72 percent and considers charges above it void. Indiana’s statute also counts a transaction as a loan whether or not it is written in loan form. That wording gives a merchant an argument that a disguised loan can still cross the 72 percent line.
New York Usury Law
There has not been an appellate published opinion in Indiana where a court has ruled that a merchant cash advance transaction is a loan or not a loan under Indiana law. There was a Bankruptcy Court Opinion in the southern district of Indiana In re Watchmen Security LLC Nov 20, 2024 regarding a $125,000 advance funded for $186,250 in receivables where the contract stated New York Law and the Judge James M Carr ruled the funder was unable to have its $55,669.65 claim secured but only unsecured as a general creditor claim. Because of the common practice of choosing New York Law for contracts, New York usury law is commonly the law that is used to determine whether the transaction is a loan as it relates to Indiana merchants.
New York law on that issue can be more favorable to merchants. In Adar Bays v. GeneSYS ID (2021), New York’s highest court held that a loan in excess of 25% was in violation of the state’s criminal usury law and was void entirely, and that a corporate borrower could invoke that defense. In 2023 the federal appeals court for the Second Circuit affirmed that an MCA was a usurious loan. It considered the three factors of whether there was reconciliation, whether the term was finite, and whether the funder could still be paid if the merchant went bankrupt. In January 2025 Yellowstone Capital agreed to a $1,065,000,000 judgment in a New York attorney general case for advances to over 18,000 businesses.
Confession-of-judgment Is Not Welcome in Indiana
Confession-of-judgment is not welcome in Indiana, at least on paper. Indiana Code 34-54-3 voids the power of confession of judgment given prior to the debt default. Indiana Code 34-54-4-1 makes procuring a cognovit note or attempting to enforce one within Indiana a Class B misdemeanor. Another provision, Indiana Code 34-54-3-4, instructs Indiana courts to not grant execution upon a foreign state judgment obtained on such a void judgment confession. Taken in isolation, these statutes appear to indicate that an Indiana merchant could not be served with a confessed judgment. The Indiana Court of Appeals rejected that view in EBF Partners v. Evolving Solutions, on February 27, 2018. A New York merchant funder obtained a judgment in New York, without notice or hearing, on a $69,000 confession signed by an Indiana business. The Marion Superior Court refused to enforce the judgment.
The Court of Appeals reversed, concluding that the United States’ Full Faith and Credit Clause prevails over Indiana’s cognovit ban where the New York court had jurisdiction. The appeals court found that the merchant’s challenges to the judgment should have been brought in New York. The companion case, EBF Partners v. Novabella, reached the same conclusion.
Amendment to CPLR 3218
New York’s 2019 amendment to CPLR 3218 narrowed this window. The confession has to be filed in the county where the defendant resided at the time the confession of judgment was signed. The amendment, signed on August 30, 2019, means that an Indiana merchant who signed the confession of judgment after that date can’t have the judgment entered in New York. Funders have begun to proceed by filing standard breach-of-contract actions in New York Supreme Court pursuant to the agreement’s forum selection clause. If there are no parties with a residence in New York, the funder generally may select any county. Hundreds of MCA lawsuits are filed in Rockland County every month.
For an Indiana business, then, these lawsuits often involve three jurisdictions. The breach-of-contract action will likely be in a New York state court. Enforcement proceeds in an Indiana county court, as in the Marion Superior Court lawsuit in the EBF case. Any federal issues, including bankruptcy, will be in the Northern District of Indiana, which has offices in Fort Wayne, South Bend, and Hammond, or the Southern District, which has offices in Indianapolis, Terre Haute, Evansville, and New Albany. Appeals from both are heard in the Seventh Circuit.
Uniform Enforcement of Foreign Judgments Act
A New York judgment reaches Indiana bank accounts through Indiana’s Uniform Enforcement of Foreign Judgments Act. Under Indiana Code 34-54-11-2, the funder files the judgment with an affidavit listing both parties’ last known addresses. The clerk and the funder must each mail notice to the merchant. No execution may issue until 21 days after the original judgment was entered. Under Indiana Code 34-54-11-4, enforcement must be stayed if the merchant shows that an appeal is pending or coming, or that execution has been stayed, and posts the required security.
After a New York judgment is domesticated, the funder seeks to enforce collection through a proceeding supplemental under Trial Rule 69(E) of the Indiana Rules of Trial Procedure and Ind. Code 34-55-8. The funder files a verified motion, and the funder can include the merchant’s bank as a garnishee. The hearing must be scheduled no fewer than 20 days from the service of the motion. The same process applies in federal courts in Indiana. The Southern District of Indiana has denied unverified motions against a bank garnishee, so technicalities can delay proceedings.
A Local Indiana Lawyer
A local Indiana lawyer may be needed at certain stages, but not all stages. While the New York suit is pending, the answer and motion to dismiss, and any usury defense are the job of counsel with standing to practice in the New York court. The EBF decision also teaches that an Indiana court will likely refer attacks against the judgment back to New York. When the judgment has been domesticated, an Indiana lawyer becomes useful for seeking a stay, attacking garnishment proceedings, and protecting exempt assets. An Indiana bankruptcy lawyer would be helpful where reorganization is feasible, as it was in the Subchapter V Watchmen Security case. Where no suit has yet been filed, counsel who can settle or counsel in bankruptcy may be preferable to counsel in either state’s litigation system.
