A merchant cash advance is promoted as the sale of a business’ future receivables, not as a loan. The rationale is that this takes it out of the interest rate cap. The advance is usually repaid as a fixed debit out of the business’ bank account either on a daily or weekly basis. The owner of the business is often called upon to personally guaranty the advance. For a Massachusetts business owner in trouble on an advance there are only a few questions. Which state’s rules apply? Which court will resolve the dispute? And if the funder wins in New York how will it get at money in a Massachusetts bank? The answers to those questions dictate the type of attorney the business owner will need and the time that he or she needs.
Massachusetts doesn’t have a commercial financing disclosure law. Connecticut and New York do. The laws require a funder to give small businesses a written disclosure of the costs. By mid-2026 Massachusetts still didn’t have one. A funder can close a deal with a Massachusetts merchant without an APR or total repayment amount. A merchant who later claims to be misled has no state disclosure requirement to cite. Any argument against the advance will have to rely on usury, consumer protection or the text of the contract.
Massachusetts’ primary usury law is criminal: General Laws chapter 271, section 49. It is a crime to knowingly charge more than 20% a year in interest and expenses; fees and commissions count toward the 20%. The penalty is up to ten years in prison and a $10,000 fine. A borrower can also ask the Supreme Judicial Court or the Superior Court to declare a usurious loan void.
There are two exceptions to this rule: one, if a lender has provided a notice to the Attorney General’s office, which is good for two years; and two, the law does not apply to a lender that is subject to oversight and examination by the state or the federal government.
In order for any of section 49 to be engaged the merchant must establish to the court that the advance was a loan.
This argument has been accepted in the lower courts in Massachusetts but not on appeal.
In February 2017, in Saturn Funding v. NRO Boston, the Superior Court denied enforcement of a confessed judgment executed in New York against a Massachusetts merchant and guarantor. The judge determined that the agreement at issue was in fact a loan in violation of Massachusetts usury and consumer protection laws. (The funder in this case apparently didn’t put up much of a fight.)
In May 2018, in Forward Financing v. NRO Boston, Suffolk Superior Court Judge Wilkins denied a funder’s motion for summary judgment that its advance was not a loan.
Neither decision is binding upon other judges, but both reveal that a judge in Massachusetts might not accept the label of “receivables” without further analysis.
Massachusetts Business-to-Business Unfair Practices Statute (M.G.L. c. 93A section 11) A Massachusetts merchant can sue under M.G.L. chapter 93A section 11. Any business can sue if it can prove that it was subject to unfair or deceptive acts or practices and it can recover actual damages and attorney fees. Where the court finds the violation to be willful or knowing, the court can award double or triple damages. Unlike a consumer who may sue under 93A, a business suing under section 11 does not have to first serve a demand letter. Section 11 will have some barriers to clear in an advance dispute. The unfair acts or practices must have occurred “primarily and substantially” in Massachusetts, which the New York funder will certainly contest. In addition, a funder can limit damages to single damages if the funder makes a reasonable written settlement offer that is rejected.
What about confession-of-judgment clauses? Not any better for a Massachusetts company. It turns out that Section 13A of Chapter 231 of the Massachusetts General Laws says that no agreement whereby any party hereto gives an advance consent to entry of judgment against him shall be valid and any judgment entered pursuant to any such provision shall be voidable, on motion of the defendant. The judgment shall be vacated, and any order of collection shall be stayed, without bond. New York once had a similar opening that closed in August of 2019 due to an amendment to CPLR 3218. Now a confession can only be made in the county of New York where the defendant was then domiciled or doing business. So, a Massachusetts company that doesn’t have a place of business in New York will be out of the statute. But the New York Appellate Division has ruled that the statute doesn’t prevent the funder from taking the ordinary course.
Ordinary lawsuits in New York Supreme Court, under the contract’s forum-selection clause, are how most Massachusetts merchants now get sued. A September 2026 review of Rockland County filings found hundreds of advance lawsuits each month. Many named out-of-state defendants, often served by certified mail, and Rockland had no connection to the deals. Most cases ended in default judgments after a 30-day window passed. New York law can also help merchants. Its civil usury cap is 16 percent and its criminal threshold is 25 percent. In January 2025, New York’s Attorney General settled with Yellowstone Capital for $1.065 billion, canceling more than $534 million owed by over 18,000 businesses nationwide.
Now, just because the New York court issued the judgment, it doesn’t mean the funder is just breaking into your Massachusetts bank account.
Massachusetts has its own Uniform Enforcement of Foreign Judgments Act that was enacted in April 2019 (section 4A, chapter 218). The funder has to submit an authenticated copy of the judgment and an affidavit containing the names and addresses of the funder and parties with the District Court in the state where the debtor either resides or carries on a trade. Then the clerk is supposed to send out a notice. The judgment then becomes a Massachusetts judgment, so it can be contested via a motion to vacate or stay. Under the Massachusetts Appeals Court case of Berg v. Ciampa (2021), a judgment creditor can register a judgment in the District Court and also enforce the judgment in the Superior Court. Then the funder can start the trustee process (chapter 246) to attach the bank deposit. The $2,500 exemption (section 28A) is only for individuals, so the funder won’t have to worry about that for businesses.
Another way is through the federal courts. It is somewhat unlikely that an advance could be brought there, but if a funder obtained a final judgment for money in the federal courts, it could then register that judgment in the District of Massachusetts under 28 U.S.C. section 1963 and enforce the judgment there as if it was a local judgment. A Massachusetts business would file bankruptcy in the U.S. Bankruptcy Court for the District of Massachusetts, which has federal courts in Boston, Worcester, and Springfield. In the Shoot the Moon case in another jurisdiction, the trustee recovered over $1.1 million in advance payments after deals were found to be loans.
Who is the lawyer you should hire in Massachusetts?
That depends. After the business owner has been served with a summons in New York, the most important lawyer is one who can practice in that state, because default occurs for failure to respond to a summons. A Massachusetts only admitted lawyer may not be allowed to practice in that court. However, the most important lawyer is a local lawyer once a funder has registered a judgment in a Massachusetts District Court or has served a trustee summons on the company’s bank. A Massachusetts lawyer can move to vacate the confessed judgment pursuant to section 13A, and assert usury and chapter 93A defenses. A business owner who is current on payments, with no action commenced, may benefit most from a settlement negotiator. A business owner with multiple stacked advances that it cannot afford may want to contact a bankruptcy attorney in the District of Massachusetts first.
