Owners who use a merchant cash advance sometimes want to know the difference between “trying to collect the money” and “harassment.” Funders give you money up front based on how much you’re bringing in right now, and then they start taking a chunk of your daily or weekly bank deposits, until you’ve paid back way more than they gave you. The business ballooned after 2008 because banks said no to small business loans and that created an opening, with about $19 billion funded in a recent year compared to $8 billion five years prior. It is a lightly regulated market. The best answer to “when does this cross the line?” is, “Let’s look at what regulators and merchants have documented.” Most of what has been documented comes from a handful of lawsuits and merchant accounts that are now a few years old, but in 2026 they are still the clearest map of where the line sits.
What Makes It Harassment
Every aggressive move is not harassment. A funder is allowed to sue you if you default on a loan. What makes it harassment is when they start making threats, or when they start bothering people outside the contract, like your customers or your suppliers, or when they start taking money that the contract doesn’t say they’re supposed to take. When you are a small business owner, a hardball MCA funder can feel like an all-powerful overlord. You just don’t have the same resources.
Sometimes you don’t have to dig for the disreputable. This one came down from the attorney general of New York. RCG Advances was sued, and the complaint says one of their executives actually told a customer, “I am going to make you bleed.” In the same complaint they also accused him of saying he would kidnap another customer’s daughters if he didn’t get paid. But threats of violence and kidnapping are not in the gray area. That is about as clear as a line can get.
Jay Hoehn ran a fitness studio in La Jolla. He borrowed $9,000 from a company called Par Funding after a surgery. He agreed to pay them back about $16,000. Then the governor shut down all the gyms, and his revenue disappeared. Par Funding emailed all of Hoehn’s clients and told them that if they owed Hoehn money, they had to send it to Par instead. The email threatened prosecution and litigation if they didn’t comply. Hoehn said “It’s totally inappropriate for them to harass me for receipts I’m not getting.” That’s not how this is supposed to work.
Then, on July 27, the day before the FBI raided Par Funding, Par filed a confession of judgment against Hoehn. A confession of judgment is something a lender will file with the court that essentially allows it to freeze the merchant’s bank accounts. In exchange for getting a loan, the borrower agrees ahead of time that when the lender sues, the borrower automatically admits liability. Hoehn said: “It almost seems like it is a gangster operation.” A confession of judgment is a court filing, not a threat, but filed against an owner whose business the state had just closed, it is easy to see why it felt like one.
Bryan Hartig runs a pet food business in Bangor, Pennsylvania that makes its living selling at fairs and festivals, all of which had shut down, so he called his funder Par and said “we are out of business.” And Par says ‘we’re going to take your house, take your cars.’ And then Par writes letters to his vendors, and the vendors realize he’s in trouble and cut off all his credit lines. Notice what happened there. A small business is just trying to exist, and all these people who aren’t in the contract suddenly learn of his obligations, and they just cut him off.
Jim Cook was a social worker and he started Antelope Valley Community Clinic, a nonprofit that now helps more than a hundred thousand people in Lancaster, California. In 2017, the CFO of the clinic borrowed about $1.2 million from several MCA companies. One of the companies is a subsidiary of RCG Advances. The automatic withdrawals ate more of the clinic’s cash flow than it could manage. In early 2018 the clinic’s board decided it could no longer pay, and stopped. The lenders put liens on the clinic’s bank accounts. The lenders put liens on the clinic’s vendors. Even Cook’s personal account got frozen. It ended up with the clinic selling itself to another nonprofit and paying $2.6 million to get out from under the $1.2 million.
The FTC sued Yellowstone Capital of New York. According to the FTC, Yellowstone told the people it financed that they wouldn’t have to sign personal guarantees, but in fact they did. Yellowstone also kept withdrawing more money from their bank accounts than they had agreed to, and worse, it kept pulling money out after they’d paid off the financing. The FTC also sued another lender, RCG Advances, for misleading people, and more than a dozen businesses in six states said lenders kept pulling their money even after their income was wiped out by COVID-19 shutdowns.
The regulators are cracking down on MCA companies. The FBI raided Par Funding out of Philadelphia. The SEC sued Par, and a judge put a receiver in charge of the company. According to the SEC, Par’s effective interest rate hit 400 percent. The state of New York says that RCG’s effective interest rate often exceeded 1,000 percent. Because MCA companies are not banks, they have been lightly regulated, but officials are now looking at whether usury limits and federal and state protections should apply. FTC commissioner Rohit Chopra said, “We’re looking hard to make sure that those lenders aren’t adding to the misery and setting small businesses up to fail.”
The New York attorney general, Letitia James, is still going after the MCA crowd. Her spokesman, Fabien Levy, put it this way: ‘Many small businesses are struggling and trying to figure out how they can get by. We don’t want them to feel they have no other option but to go to these predatory lenders’. Par Funding, on the other hand, is fighting the SEC. It says the charges are wrong, that it uses the best business practices, and that it has a full-time compliance officer. Par said in court it was pursuing 1,000 collection actions against borrowers it said were in default.
The Tactics That Cross the Line
So where does that leave you? Put plainly, the tactics that cross the line are violence or the threat of violence, and contacting parties outside of your contract. Unfair tactics are lying, taking money you aren’t supposed to take, and taking more money than you agreed to take. The impact on small businesses is staggering, in money, in terror, and in shrinking opportunities.
If your funder is doing any of this to you, first, print off every email, every letter, every voicemail. Don’t wait. Cook and his board fought the lenders through 2018 before deciding they weren’t getting out of it on their own. If you’re holding onto hope, and there’s no clear plan to get out from under them, it’s probably time to get outside help. Hoehn says ‘I fault myself because I didn’t do enough research.’ He’s not the first one. If you feel you’re being treated like a hostage, you should probably check with an attorney.
