6 Situations Where You Can Countersue Your MCA Funder

This is the big one. The single most powerful counterclaim you can bring against an MCA funder.

Here's how it works. MCA companies structure their agreements as a "purchase of future receivables." Not a loan. They do this on purpose — because if it's not a loan, they don't have to follow state usury laws that cap interest rates. And that means they can charge you effective APRs of 200%, 300%, sometimes north of 900%. Legally. Or so they claim.

But courts are catching on. If your MCA functions like a loan, it is a loan — regardless of what the contract calls it. And if it's a loan with an interest rate above your state's legal limit, it's usurious. Unenforceable. Void.

Courts look at three factors when deciding if your MCA is really a loan:

Is there a real reconciliation provision? A true MCA adjusts your payments based on your actual revenue. If your funder was pulling fixed daily amounts regardless of how your business was doing — that's a loan. The "reconciliation clause" in your contract is probably there for show. Courts call this an illusory provision, and they're not impressed by it.

Does the agreement have a fixed term? If you can calculate exactly when you'd finish paying (divide the total owed by the daily debit), that's a de facto finite term. That's a loan characteristic, not an MCA characteristic.

What happens if you file bankruptcy? In a true receivables purchase, the funder assumes the risk that your business might fail. If your agreement treats bankruptcy as a default and demands full repayment anyway — the funder isn't assuming any risk at all. That's a loan.

If your agreement fails these tests, you may be able to countersue for usury. And the consequences for the funder are severe. In some states, a usurious loan is completely void — meaning they can't collect the interest, the fees, or even the principal. Everything. Gone.

This one is more common than you'd think. And it usually starts with the broker.

You were told the factor rate was "basically like interest." You were told you'd be out of the MCA in 30 days and into a traditional loan. You were told you could take additional financing without a problem. None of it was true. And none of it was in the contract you signed.

If you were misled about the cost, the repayment structure, or the terms of your MCA, that's fraud in the inducement. It means you didn't actually consent to what you signed — because what you signed isn't what you were told you were signing.

This comes up constantly with stacking. A broker funds you with three or four MCAs simultaneously, tells you it's fine, collects their commission on every single one, and disappears. Meanwhile you're drowning in daily debits you can't afford and every single one of those contracts has a clause that says taking additional financing is a default. The broker set you up to fail. On purpose. For a commission check.

Courts can void agreements obtained through fraud. And if you can prove the funder or broker knowingly misrepresented the terms — through emails, recorded calls, texts, anything — you've got a counterclaim that changes the entire dynamic of the case.

Unconscionability is a legal concept that basically means: the contract is so one-sided, so unreasonable, so stacked against you that no court should enforce it. And a lot of MCA agreements clear that bar easily.

Think about what a typical MCA contract does. You sign away your right to a trial (confession of judgment). You agree to pay attorney fees, collection fees, default fees, and accelerated balances the moment anything goes wrong. You agree that all disputes must be litigated in New York — even if you're a small business in Florida or Texas with no connection to New York at all. You agree to a personal guarantee that puts your house, your car, your personal bank accounts on the line. And the funder can change the terms of the ACH withdrawal without your consent.

All of that, in a non-negotiable contract, presented to a business owner who needed cash in 48 hours and didn't have a lawyer review it. Courts don't love that.

If you can show the terms were grossly unfair and you had no meaningful ability to negotiate, you have an unconscionability defense — and potentially a counterclaim. Especially if the forum selection clause (the part that forces you to litigate in New York) was designed to make it impossible for you to even show up and defend yourself.

This is one of the most underused counterclaims in MCA litigation. And it's powerful.

Remember — the entire legal basis for an MCA being "not a loan" rests on the idea that your payments adjust based on your actual revenue. That's the reconciliation provision. It's the thing that makes the funder a "purchaser of receivables" instead of a lender.

But most funders ignore it. Your revenue drops 40%, and they're still pulling the same fixed daily amount. You request a reconciliation — which is your contractual right — and they either deny it, ghost you, or tell you it only applies if you're current on payments (which defeats the entire purpose).

When a funder refuses to reconcile, they're essentially admitting the agreement is a loan. They're collecting fixed payments regardless of your revenue. They're not sharing in the risk of your business. And they've breached their own contract in the process.

You can countersue for breach of contract. And this counterclaim also strengthens a usury argument — because a funder who won't reconcile is a funder who's operating a loan, not a receivables purchase.

Some MCA funders don't wait for you to default. They engineer it.

Here's how. They attempt an ACH withdrawal on a day they know your account will be short. Or they pull an amount that's higher than what was agreed. Or they withdraw funds twice in the same day. Each failed attempt triggers NSF fees from your bank and returned payment fees from the funder. A few rounds of this and your account is hemorrhaging money — money that was supposed to cover the next day's withdrawal. Which also fails. Which triggers more fees.

Within a week, you're in default. Not because your business failed. Because the funder pushed you into it.

This is bad faith, and it's actionable. If you can show that the funder's own behavior caused or accelerated your default — through withdrawal timing, unauthorized amounts, or failure to adjust payments — you have a counterclaim for breach of the implied covenant of good faith and fair dealing.

And here's why it matters: A funder who triggers a default on purpose did it because default is profitable for them. Default activates the acceleration clause (they demand the full balance), the personal guarantee, and the confession of judgment. They wanted you to default. That's not a business relationship — that's a trap.

MCA debt is commercial debt, which means the federal Fair Debt Collection Practices Act (the FDCPA) generally doesn't apply. The funders know this. And some of them use it as a license to go scorched earth on you.

They'll call you 15 times a day. Call your employees. Call your customers — and tell them you're in financial trouble. Contact your vendors and try to intercept payments you're owed. Threaten criminal charges that don't exist. Threaten to "send someone to your business." Misrepresent the amount you owe. Forge documents. File UCC notices against receivables they have no right to.

Just because the FDCPA doesn't apply doesn't mean there are no rules. Many states have their own consumer protection and deceptive trade practice statutes that cover commercial transactions. California, for example, extended consumer-style debt collection protections to small business debts under $500,000 as of January 2025 under the Rosenthal Act. New York's deceptive practices statute (GBL § 349) has been used against MCA funders.

If your funder or their collection agency crossed the line — threats, harassment, contacting third parties to embarrass you, misrepresenting what you owe, or intercepting payments they're not entitled to — you may have a counterclaim under state law. And these counterclaims come with teeth. Some statutes allow for statutory damages, attorney fees, and punitive damages on top of actual damages.

Here's what most business owners don't realize. A strong counterclaim doesn't just give you a chance to win money back from the funder. It changes the entire leverage dynamic of the case.

When an MCA funder sues you, they expect you to either ignore it (default judgment), panic (settlement on their terms), or hire a lawyer who files a generic answer. They are not expecting you to come back with a counterclaim for usury, fraud, and unconscionability. That changes the math completely.

A funder who's facing a usury counterclaim isn't just risking losing the case — they're risking having their contract declared void. If they lose on usury, they can't collect anything. Not the fees. Not the purchased amount. Nothing. And that's a risk most funders would rather settle away than litigate.

This is why hiring an attorney who specifically handles MCA defense — not a general practitioner, not a debt settlement company, an actual MCA litigator — matters. A settlement company will negotiate 50 cents on the dollar and call it a win. An MCA attorney will file counterclaims that make the funder's legal team recalculate whether this case is worth pursuing at all.

The leverage is there. But only if you know how to use it.