Merchant Cash Advance Confession Of Judgment


Hey there! Joe from Delancey Street here. Today I want to have a real talk with you about merchant cash advances (MCAs) and confessions of judgment (COJs). I know, I know – it sounds super boring and legalistic. But stick with me, because this stuff is so important for small business owners like you to understand before getting an MCA.Let me start with some background. So merchant cash advances are a type of financing where a company like mine provides upfront cash to a business in exchange for a percentage of future credit card sales. It’s not technically a “loan” so usury laws don’t apply. Pretty clever, right?Now here’s where COJs come in. Many MCA companies will have you sign a COJ as part of the agreement. Essentially, it’s you confessing that if you default, the MCA company can get a judgment against you without you even knowing about it or getting a chance to defend yourself in court. Not so great for you, very convenient for them.I know, it sounds terrifying! But unfortunately COJs have become super common with MCAs in recent years. These companies include them so that if you miss payments, they can quickly get their money back without having to go through the whole legal process. Here’s a quick rundown of how it works:

  • You sign the COJ as part of your MCA agreement, usually without realizing how damaging it can be
  • If you default, the MCA company can take the COJ to court and get a judgment against you
  • The court enters the judgment, allowing the MCA to start seizing your assets – even personal stuff like your house or car
  • You likely won’t find out until your accounts are frozen or emptied. No notice required!

See why I wanted to warn you about this? Signing a COJ gives the MCA company a crazy amount of power over you and your business. Some definite pros and cons here:Pros:

  • MCA companies can offer financing to riskier businesses that banks won’t touch
  • Fast access to capital when you need it
  • Don’t have to put up collateral like with a bank loan


  • Absurdly high interest rates, like 50-200% APR
  • If you default, they can destroy your business and personal finances
  • Limited legal options once they have a judgment against you

So what types of MCA companies tend to use COJs? Well, in my experience the shadier ones rely on them heavily. That’s because it gives them an easy way to get their money back from struggling businesses. Some big names in the MCA world like Kabbage and PayPal don’t mess with COJs.But others like Par Funding and Yellowstone Capital – yeah, they looooove their COJs. We’re talking hundreds of lawsuits filed, freezing accounts overnight, the works. Not cool.Because of horror stories like that, New York and New Jersey recently banned COJs for MCAs altogether. No more signing away your legal rights before you even know it! Some other states have limited or banned them too, but not Pennsylvania yet unfortunately.We really need our lawmakers to step up and protect small businesses here. Otherwise, Pennsylvania will keep being a safe haven for predatory MCA companies to operate.So what can you do if an MCA company tries to stick a COJ in your agreement? Here are some tips:

  • Read the fine print! Don’t sign anything you don’t understand.
  • Talk to a lawyer and understand all your options before signing.
  • See if you can negotiate the COJ out of the contract.
  • Explore alternatives like business loans from reputable lenders.
  • If you already signed a COJ and are in trouble, consult a lawyer ASAP about defenses.
  • Don’t panic – people have succeeded in getting COJ judgments vacated.
  • Reach out to advocacy groups pushing for COJ reform.
  • Spread awareness about the issue to other business owners!

Whew, that was a lot of info! But I hope this gives you a good overview of why merchant cash advance confessions of judgment are so concerning. Us little guys gotta stick together and look out for predatory lending practices.At Delancey Street, we take a different approach to business financing. No crazy interest rates, no COJs – just responsible funding focused on your long-term success. So if you need capital, let’s chat! We’re always happy to explore options that set you up for growth, not failure.Stay savvy out there – and don’t sign anything unless you 100% understand the risks. Feel free to reach out with any other questions!

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