Defaulting on an MCA is not like defaulting on a credit card. The structure of the contract — and the legal tools most funders have ready — means the consequences move faster and hit harder. If you're considering missing payments, understand what you're walking into first.
What can happen, often within days
- ACH reversal fees. Each bounced payment usually adds a fee.
- UCC lien filing. The funder typically has a blanket UCC on your business assets and can perfect or enforce it.
- Frozen merchant accounts. If they have a relationship with your processor, your card revenue can be intercepted.
- Collection calls and emails. Often to you, your accountant, and sometimes your customers (this is illegal in many states; document everything).
What can happen within weeks
- Confession of judgment. If your contract has a COJ and it's valid in your state, the funder can convert the debt into a judgment without a trial. Some states have restricted COJs; many haven't.
- Lawsuit. Even without a COJ, funders can and do sue.
- Bank account levies. Once there's a judgment, funds can be pulled directly from business accounts.
So what should you actually do?
If default is coming, get in front of it. Specialists can often pause or restructure before things go sideways — and even after default, there are paths forward. What does not work is going silent and hoping. The funder will not forget.