MCA contract red-flag checker
Twenty-one provisions that show up in merchant cash advance agreements, what each one looks like on the page, and why it matters specifically to a business that pays for materials and payroll before it gets paid. Work through it with the actual document open. Nothing you tick leaves your browser.
Last reviewed against the primary sources cited on this page: 6 August 2026. Enforcement actions, statutes and regulations in this area change quickly. Re-check every source before you rely on it.
This is a general educational checklist. It is not a review of your document and it is not legal advice.
This tool has not seen your agreement and cannot see it. It cannot tell you what your contract says, whether any clause in it is enforceable, or what the law of your state does with it. It is a reading list, not an opinion. Contractor Lane is not a law firm and no attorney-client relationship is created by using this page.
Ticking a box does not mean anything is unlawful. Every one of these provisions appears in agreements that are lawful. What the list does is tell you which paragraphs to put in front of a business-finance attorney first, and which questions to make the provider answer in writing before you sign.
Tick everything you can find in the agreement
If you cannot tell whether a provision is present, leave it unticked and write the question down. “I could not find it” and “it is not there” are different answers, and the difference is worth asking about.
How the money comes out
What you are putting at risk
What counts as going wrong
Cost and exit
Where a fight would happen
Where these provisions come from
The list is not invented. Every item is drawn either from an official enforcement record describing conduct around that provision, from FTC staff analysis of the product, or from a published court decision analysing the clause. The relevant quotes:
“Here, with respect to a reconciliation provision, the agreement provides that the plaintiff "may, upon [United’s] request, adjust the amount of any payment due under this Agreement at [its] sole discretion and as it deems appropriate"”
LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664, 2020 NY Slip Op 01607 (App Div, 2d Dept), decided 4 March 2020. https://www.nycourts.gov/Reporter/3dseries/2020/2020_01607.htm
Reviewed 6 August 2026. Supports items on reconciliation and provider discretion.
“Unless a principal sum advanced is repayable absolutely, the transaction is not a loan. Usually, courts weigh three factors when determining whether repayment is absolute or contingent: (1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy”
LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664, 2020 NY Slip Op 01607 (App Div, 2d Dept), decided 4 March 2020. https://www.nycourts.gov/Reporter/3dseries/2020/2020_01607.htm
Reviewed 6 August 2026. New York law as stated by the Appellate Division, Second Department. It is why reconciliation, term and bankruptcy recourse sit at the top of this list.
“Accordingly, it would be concerning, and potentially unlawful, if MCA providers fail to adjust payment amounts to reflect a decrease in sales.”
Federal Trade Commission, Bureau of Consumer Protection staff, "Strictly Business: An FTC Forum on Small Business Financing" (staff perspective), February 2020. https://www.ftc.gov/system/files/documents/reports/staff-perspective-paper-ftcs-strictly-business-forum/strictly_business_forum_staff_perspective.pdf
Reviewed 6 August 2026.
“MCA providers should not exercise default remedies – such as enforcing a COJ – in the absence of a default condition.”
Federal Trade Commission, Bureau of Consumer Protection staff, "Strictly Business: An FTC Forum on Small Business Financing" (staff perspective), February 2020. https://www.ftc.gov/system/files/documents/reports/staff-perspective-paper-ftcs-strictly-business-forum/strictly_business_forum_staff_perspective.pdf
Reviewed 6 August 2026. Supports the confession-of-judgment and broad-default items.
“Deceiving consumers about personal guarantees: The defendants’ websites falsely claimed that their cash advances required "no personal guaranty of collateral from business owners," meaning that the people obtaining financing on behalf of companies would not have their personal possessions treated as collateral. In fact, their contracts did include those requirements.”
Federal Trade Commission press release, "FTC Action Results in Ban for Richmond Capital and Owner From Merchant Cash Advance and Debt Collection Industries and Return of More Than $2.7M to Consumers", 6 June 2022. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-action-results-ban-richmond-capital-owner-merchant-cash-advance-debt-collection-industries
Reviewed 6 August 2026. Supports the personal guarantee item, and the instruction to believe the document rather than the marketing.
“Providing less funding than promised: The complaint alleges that when businesses received their funding from the defendants, it was often thousands of dollars less than promised. The shortfall was due to large supposed fees that were not disclosed to the business owners.”
Federal Trade Commission press release, "FTC Action Results in Ban for Richmond Capital and Owner From Merchant Cash Advance and Debt Collection Industries and Return of More Than $2.7M to Consumers", 6 June 2022. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-action-results-ban-richmond-capital-owner-merchant-cash-advance-debt-collection-industries
Reviewed 6 August 2026. Supports the fee items.
“Such consequences include being forced to renew their advances or take out multiple MCAs at the same time, potentially encumbering the same receipts (a phenomenon known as "stacking"), in order to both meet their repayment obligations and avoid shutting down.”
Federal Trade Commission, Bureau of Consumer Protection staff, "Strictly Business: An FTC Forum on Small Business Financing" (staff perspective), February 2020. https://www.ftc.gov/system/files/documents/reports/staff-perspective-paper-ftcs-strictly-business-forum/strictly_business_forum_staff_perspective.pdf
Reviewed 6 August 2026. Supports the renewal and stacking items.
“The amended complaint alleges that the defendants frequently continued to make the withdrawals well after the promised amount had been withdrawn, in one instance taking more than $75,000 without permission.”
Federal Trade Commission press release, "FTC Files Amended Complaint Seeking Civil Penalties Against Small Business Financing Providers", 14 June 2021. https://www.ftc.gov/news-events/news/press-releases/2021/06/ftc-files-amended-complaint-seeking-civil-penalties-against-small-business-financing-providers
Reviewed 6 August 2026. Supports the ACH-authorisation and multiple-account items, and the instruction to count the debits yourself.
Sources
- Federal Trade Commission, Bureau of Consumer Protection staff, "Strictly Business: An FTC Forum on Small Business Financing" (staff perspective), February 2020. https://www.ftc.gov/system/files/documents/reports/staff-perspective-paper-ftcs-strictly-business-forum/strictly_business_forum_staff_perspective.pdf — reviewed 6 August 2026.
- Federal Trade Commission press release, "FTC Alleges Merchant Cash Advance Provider Overcharged Small Businesses Millions", 3 August 2020. https://www.ftc.gov/news-events/news/press-releases/2020/08/ftc-alleges-merchant-cash-advance-provider-overcharged-small-businesses-millions — reviewed 6 August 2026.
- Federal Trade Commission press release, "FTC Files Amended Complaint Seeking Civil Penalties Against Small Business Financing Providers", 14 June 2021. https://www.ftc.gov/news-events/news/press-releases/2021/06/ftc-files-amended-complaint-seeking-civil-penalties-against-small-business-financing-providers — reviewed 6 August 2026.
- Federal Trade Commission press release, "Merchant Cash Advance Providers Banned from Industry, Ordered to Redress Small Businesses", 5 January 2022. https://www.ftc.gov/news-events/news/press-releases/2022/01/merchant-cash-advance-providers-banned-industry-ordered-redress-small-businesses — reviewed 6 August 2026.
- Federal Trade Commission press release, "FTC Action Results in Ban for Richmond Capital and Owner From Merchant Cash Advance and Debt Collection Industries and Return of More Than $2.7M to Consumers", 6 June 2022. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-action-results-ban-richmond-capital-owner-merchant-cash-advance-debt-collection-industries — reviewed 6 August 2026.
- LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664, 2020 NY Slip Op 01607 (App Div, 2d Dept), decided 4 March 2020. https://www.nycourts.gov/Reporter/3dseries/2020/2020_01607.htm — reviewed 6 August 2026.
This is not legal advice and it is not financial advice. Contractor Lane is not a law firm, not a lender, not a broker, not a funder, and not a financial adviser. Nothing on this page is a recommendation to take or refuse any financing. Merchant cash advance agreements differ from one another in ways that change the legal answer, and the law that applies to yours depends on the actual wording of your contract and on your state. Before you sign, take the agreement to a business-finance attorney, and take the numbers to a CPA or a qualified commercial-finance adviser who is not being paid a commission on the deal.
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