If you’re a Florida business owner and your MCA provider - or an MCA provider based out of state - has sued you, you may be asking how a Florida MCA attorney can assist. MCA agreements are structured as a purchase of your business’s future revenue, not a loan. However, some merchants argue that MCAs are “disguised loans” and therefore governed by their state’s usury laws. While several states have developed clear legal precedent distinguishing loans from purchases of receivables, Florida has relatively little authority on the matter. That gap is why one appellate decision matters so much in 2026, whether the funder suing you is based in Florida or in another state.
Craton Entertainment, LLC V. Merchant Capital Group, LLC
Which Florida case should you look at if you want a practical answer to “Is my MCA a loan or a sale?” The one that actually helps is Craton Entertainment, LLC v. Merchant Capital Group, LLC, decided by Florida’s Third District Court of Appeal. Here’s the run-through: Merchant Capital sued Craton in 2016 when Craton fell behind on its MCA. Craton didn’t just deny the debt; it filed a counterclaim with 12 counts. The heart of its case: the purchase and sale agreement was a disguised loan, and Merchant Capital violated Florida’s criminal usury statute. Both parties asked the court for summary judgment. The trial court ruled for Merchant Capital, saying the agreement was a sale of future receivables that included a reconciliation provision, not a loan for purposes of Florida usury law.
Craton’s lawyers took the fight to the appellate level, arguing that the agreement was a loan in everything but name. They pointed to a credit check on the business (standard practice), the absence of any “forgiveness” or “void” provision for the “debt”, a security interest in Craton’s assets, and a personal guarantee from the owner. Many business owners recognize these same arguments when they dispute their own funding agreements.
Merchant Capital said the written agreement showed the parties intended a buy-sell agreement. What matters more than the words on the page is that the agreement didn’t have what makes a loan a loan: an absolute right for the party providing money to demand repayment. In this case, Merchant Capital was only entitled to payments if Craton made money. The personal guarantee was tied to Craton performing under the agreement, not repayment. A reconciliation provision modified the drawings from Craton’s bank accounts to match the ebb and flow of the business.
Does an MCA count as a loan? The Third District Court of Appeal said not. In a short, one-page order, it relied on a few Florida cases. In one set of cases, courts concluded an MCA agreement is not a loan when repayment is not absolute but is conditioned on the success of the underlying venture. In another set, courts said the transaction is not a loan if part of the investment is at speculative risk. In other words, this makes the Florida usury defense harder for a merchant. The features Craton mentioned (credit check, security interest, personal guarantee) were not enough to convince the court.
Now funders who sue Florida merchants have precedent on their side, and the decision is welcome guidance for MCA companies that do business in Florida. The opinion in the Craton case discussed multiple issues arising regularly in MCA litigation, and the court came down clearly in the favor of the funder. It also illustrates how much a properly executed purchase and sale agreement matters. The funder’s attorneys are going to talk about Craton. You want your attorney to know about it too.
The Battle Is the Contract
So how does a Florida MCA lawyer help a merchant when a lawsuit lands? It starts with the contract. Does the funder’s right to be paid depend on whether your business made money, or does the funder have an absolute right to repayment? Was there a reconciliation clause, and did they follow it? Does the personal guarantee actually guarantee performance, or just repayment? After Craton, there’s no free win just by proving a credit check or a signature. The battle is the contract.
To a struggling merchant, why do we care so much about the reconciliation provision and the revenue condition? In the agreement under review, the funding company could only collect if the merchant had revenue, and the reconciliation provision was intended to help the business scale down the amount taken from the bank account when things were slower. That was the key to making the agreement a sale, and not a loan. If your sales have tanked, ask your lawyer if your MCA agreement has that reconciliation provision, and whether the provider adjusted the withdrawal amounts when you requested it.
Non-contractual Behavior
The out-of-state picture is different. Courts in other states have recharacterized MCA agreements as loans by looking beyond the contract to what happened in practice - the way the funder advertised itself, the parties’ course of dealing, and other factors. A court’s opinion may say one thing, but your funder’s actions can say another. The Craton court wasn’t required to decide how non-contractual behavior should be judged, but that doesn’t mean a lawyer fighting an MCA fight in a state other than Florida can ignore it. They’re going to dig into your funder’s advertising, website, social media and actual collection practices. That can change everything.
A carefully drafted contract is not enough to protect MCA companies from “re-characterization” risk. After Craton, MCA companies were counseled to investigate all facets of their business operations including their marketing methods, social media and website content, and internal policies and procedures for inconsistencies with the many laws governing what’s a loan and what’s an MCA. For the owner, that’s a road map to where the screws are loose: what the funder promised and how they behaved outside the four corners of the deal.
So, you got sued for the money you got from an MCA. Now what? Your best chance to protect yourself is to have a lawyer review the agreement you have with the funder before you respond. Also, a debt settlement firm, which is not a law firm, can assist a business owner by working with the business owner’s attorney to negotiate with the funder. Do not ignore the lawsuit.
