Best Ways to Review a Merchant Cash Advance (MCA) Contract Before You Sign (2026)

A confession of judgment (COJ) is a clause or document you sign at funding in which you agree to let the MCA company obtain a court judgment against you — often without a normal lawsuit, notice, or hearing — if they claim you breached the deal, effectively waiving your right to defend yourself. The FTC's case against MCA operator Jonathan Braun (RCG Advances/Richmond Capital) cited the use of confessions of judgment to seize businesses' assets; the court issued a permanent industry ban in 2023 and entered a $20.3 million judgment in 2024. Enforceability varies by state and has been curtailed in some — New York's 2019 reform, for example, restricted COJs against out-of-state debtors — so before you sign, identify whether a COJ is in your agreement, what state it would be filed in, and strongly consider having an attorney review it.

A factor rate (commonly 1.1 to 1.5) is multiplied by your advance to set total payback and does not account for time — a $50,000 advance at 1.4 means you repay $70,000 no matter how fast you pay. Because MCAs are repaid quickly, the effective APR is usually far higher than the factor rate suggests, frequently landing anywhere from roughly 40% to 160% or more depending on how fast you repay. MCAs are largely unregulated at the federal level because they're structured as a purchase of future receivables rather than a loan, so there's no federal APR-disclosure requirement — though states including New York, California, and Texas have enacted commercial financing disclosure laws requiring cost disclosures. A focused review tool helps you surface the true-cost picture instead of letting the modest-looking factor rate fool you.

Not always, and this is one of the most misunderstood traps. Reconciliation is supposed to let you reduce daily payments when revenue falls, but many contracts make it conditional, discretionary, or so procedurally burdensome that it rarely helps in practice. New York's Attorney General alleged that Yellowstone Capital collected fixed daily amounts regardless of revenue — making the 'advance' function like a fixed-payment loan — and reached a January 2025 settlement carrying a roughly $1.065 billion judgment. The key is whether your reconciliation clause is a real, enforceable right or just language; that's exactly the kind of thing to check before you sign.

You can use it to explain unfamiliar terms, but don't rely on it as your only safeguard. General AI chatbots hallucinate — a widely cited Stanford study found leading general-purpose LLMs gave incorrect answers on a large share of specific legal questions, and a public tracker now lists well over a thousand court filings containing AI-fabricated citations — which is especially risky for a financial decision this size. A general chatbot also has no MCA-specific checklist and may miss a confession of judgment buried in an addendum or fail to flag that a real reconciliation right is missing. Use it to build questions, then verify with a purpose-built tool or an attorney.

Use an attorney when the stakes or complexity are high: a large advance, a deal you want to negotiate or change, an aggressive confession of judgment or broad personal guaranty, unusual or one-sided terms, or any situation where you're already behind on payments or facing collection or a lawsuit. A review tool like BizLeaseCheck explains what your contract says and flags the risks, but it does not negotiate terms, represent you, or tell you whether a clause is enforceable in your state — only a licensed attorney can do that. Many MCA-defense firms offer a free initial review, so on a serious deal it often costs nothing to get a professional opinion.

No. BizLeaseCheck is an AI document-review tool that analyzes the MCA contract you upload and returns a danger score plus red flags with the exact clause quoted — it helps you understand your own document so you can ask better questions and avoid surprises. It is not a law firm, does not provide legal advice, and does not negotiate or represent you. For high-stakes or complex deals, or anything already in dispute, treat it as a fast, affordable first read and then consult a qualified MCA attorney.