Sample Business Funding / MCA Analysis

A merchant cash advance with a high factor rate (and the estimated true APR it hides), a confession of judgment, fixed daily ACH debits, and a hard-to-use reconciliation provision.

Reviewed by the BizLeaseCheck Editorial Team · Last updated May 26, 2026 · Informational analysis, not legal advice.

97Danger score

Critical risk indicators — Business funding / MCA

This is the same report shape every BizLeaseCheck analysis produces: a 0–100 danger score, prioritized red flags with verbatim evidence quotes, the key dates buried in the document, and a tailored negotiation email draft.

8 red flags

5 key dates

Evidence-backed

Email draft included

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Executive Summary

Document: Business funding / MCA

This MCA is highly dangerous and economically expensive. Merchant receives $100,000 but must deliver $149,000, a $49,000 gross factor cost before fees, plus a $5,000 origination fee, underwriting fee, ACH program fee, returned-ACH fees, and a broker/ISO commission paid out of proceeds. If the $5,000 origination fee and broker commission are withheld from funding, the net usable proceeds are lower than $100,000, which pushes the effective cost even higher. Based on the stated $1,183 daily ACH over about 126 business days, the implied repayment period is roughly 5.8 months and the estimated effective APR is roughly 120% to 170%+, depending on whether fees were withheld from proceeds and the exact business-day schedule. The agreement contains multiple hallmark predatory MCA terms: a confession of judgment, daily ACH debits, discretionary rather than mandatory reconciliation, full-recourse personal guaranty upon default, blanket all-assets UCC lien, anti-stacking default, no prepayment discount, broad default triggers, acceleration of the full uncollected balance, New York venue/jury waiver, and renewal language that permits double-dipping of unpaid factor cost. The combination of these terms creates severe cash-flow pressure and gives the funder fast judgment and collection leverage if the business hits even a temporary downturn.

97Danger score

Financing Terms & True Cost

Merchant cash advance

Estimated true cost (effective APR)

Estimated effective APR roughly 120% to 170%+ assuming $100,000 stated advance, $149,000 total delivery, $1,183 ACH each business day for about 126 business days (~176 calendar days). If the $5,000 origination fee and broker/ISO commission were withheld from proceeds, the effective APR is higher.

Amount Funded

$100,000

Total Repayment

$149,000

Payment

$1,183

Factor Rate

1.49

Payment Frequency

Daily (business days) via ACH

Term

No fixed maturity date stated; estimated about 126 business days (~5.8 months)

Confession of judgment?

Yes

Personal guaranty?

Yes

Stacking prohibited?

Yes

Reconciliation / true-up rights

Reconciliation is nominal only; Purchaser may grant or deny requests in its sole and absolute discretion, and Merchant must keep paying the fixed daily amount unless approved in writing.

Prepayment / early termination

No economic benefit to early payoff; full $149,000 remains due with no discount, rebate, or reduction of factor cost.

Security interest / collateral

Blanket security interest in all present and future accounts, deposit accounts, inventory, equipment, and general intangibles, with authorization to file a UCC-1 covering all assets.

Fees

$5,000 origination fee, underwriting fee, ACH program fee, $50 per rejected/returned ACH, $5,000 default fee, and broker/ISO commission payable out of funded amount.

Critical Dates & Deadlines

Don't miss these dates. Add them to your calendar immediately.

Funding / Effective Date

2026-06-01|Agreement entered into as of June 1, 2026.

Expected Payoff

Estimate

Date not specified|Approximately 126 business days after funding based on the stated fixed daily payment; roughly late November 2026 assuming regular business-day debits.

First Scheduled Payment

Estimate

Date not specified|Not expressly stated; likely the first business day after funding or shortly thereafter based on daily ACH structure.

Last Scheduled Payment

Estimate

Date not specified|Not expressly stated; estimated to occur after approximately 126 business-day ACH debits.

Reconciliation Request Deadline

Date not specified|No deadline or response time stated; reconciliation is discretionary.

Detected Red Flags

Download Redlines (DOCX) View Source PDF

CriticalIssue Score: 100/100

Confession of judgment allows judgment without notice or hearing

Section 5

Why it's dangerous

This lets the funder obtain a court judgment rapidly, without ordinary litigation process, for the full uncollected amount plus fees. That can lead to frozen accounts, levies, and immediate collection pressure before the merchant has a meaningful chance to contest the claim.

“Merchant and Guarantor each irrevocably authorize Purchaser, upon any Event of Default, to enter judgment against them, without prior notice or an opportunity to be heard”(View in PDF)

Negotiation Tactic

State plainly that COJ is a deal-breaker because it creates extraordinary enforcement leverage disproportionate to the transaction.

Suggested Redline

Section 5 is deleted in its entirety. Purchaser shall have no right to confess judgment or obtain judgment without ordinary notice, service, and an opportunity to be heard.

CriticalIssue Score: 98/100

Extremely high true cost: $49,000 factor cost plus fees on a $100,000 advance

Section 2; Section 10

Why it's dangerous

The merchant is obligated to deliver $149,000 on a $100,000 advance, a gross financing cost of $49,000 before fees. Over about 126 business days, that cost implies an estimated effective APR roughly in the 120% to 170%+ range, and even higher if the origination fee and broker commission are withheld from proceeds.

“- Amount funded to Merchant (Purchase Price): $100,000 - Amount Merchant must deliver (Purchased Amount): $149,000”(View in PDF)

Negotiation Tactic

Ask for a payoff schedule showing net funded amount, all withheld fees, and payoff by month so the real annualized cost is transparent.

Suggested Redline

Purchased Amount shall be reduced to reflect a commercially reasonable cost of capital, and Purchaser shall provide a payoff schedule showing the net amount disbursed, all fees, and the declining payoff balance by date. Any withheld fee shall reduce the Purchased Amount dollar-for-dollar.

CriticalIssue Score: 97/100

Reconciliation is discretionary, not a real true-up right

Section 4

Why it's dangerous

A genuine MCA should allow payments to adjust when receipts decline. Here, the funder can simply refuse reconciliation, forcing the merchant to keep paying the fixed daily amount even if revenue drops. That makes the product function more like a fixed-payment loan while preserving MCA-style remedies.

“Purchaser may grant or deny any reconciliation request in its sole and absolute discretion, and no reconciliation shall be effective unless and until approved in writing by Purchaser.”(View in PDF)

Negotiation Tactic

Frame this as a structural issue: if remittances do not truly float with receipts, the merchant bears loan-like repayment risk without loan-law protections.

Suggested Redline

Upon Merchant's request no more than once per month, Purchaser shall reconcile remittances to the Specified Percentage of actual collected receipts within three business days after receipt of supporting statements, and any overpayment shall be promptly credited or refunded.

CriticalIssue Score: 97/100

Acceleration and aggressive remedies on default

Section 11

Why it's dangerous

This allows the funder to demand the full remaining balance immediately and simultaneously use multiple collection tools: account debits, judgment, lien enforcement, and personal guaranty. The merchant can lose liquidity and control very quickly after even a technical default.

“Upon an Event of Default, the entire uncollected Purchased Amount becomes immediately due, and Purchaser may enter the confession of judgment, debit any of Merchant's accounts, enforce the security interest, and pursue the Guarantor.”(View in PDF)

Negotiation Tactic

Bundle this with deletion of COJ and narrowing of default triggers; these provisions are most dangerous in combination.

Suggested Redline

No acceleration shall occur except after a payment default continuing for ten business days after written notice. Purchaser may debit only the designated account for agreed remittances and may not pursue other accounts, collateral, or Guarantor absent a final court judgment after ordinary process.

CriticalIssue Score: 96/100

Broad default triggers include revenue decline and bank-account changes

Section 11

Why it's dangerous

Default is not limited to nonpayment. A revenue dip, changing banks, a technical ACH issue, or taking other financing can trigger default. That gives the funder broad discretion to accelerate and enforce remedies even when the business is trying to stabilize operations.

“Each of the following is an Event of Default: any failed, blocked, or reversed ACH debit; Merchant changing, closing, or restricting access to its bank account; Merchant obtaining additional financing; a material decline in Merchant's business or revenue; or any breach of this Agreement.”(View in PDF)

Negotiation Tactic

Focus on the phrase 'material decline' as vague and subjective; ask for objective thresholds or deletion.

Suggested Redline

Event of Default means only (i) failure to remit undisputed amounts for five business days after written notice, (ii) fraud, or (iii) intentional diversion of receivables. No default shall arise from revenue decline, bank-account changes made on notice, or additional financing.

CriticalIssue Score: 95/100

Personal guaranty becomes full recourse against personal assets

Section 6

Why it's dangerous

This exposes the owner's personal bank accounts and other assets if the business defaults, even where the default is triggered by a technical ACH issue, revenue decline, or anti-stacking breach. It defeats the limited-liability protection many owners expect from operating through an entity.

“The guaranty becomes full recourse against the Guarantor's personal assets upon any Event of Default.”(View in PDF)

Negotiation Tactic

Push for a bad-boy guaranty only; many merchants can accept liability for fraud but not full recourse for business underperformance.

Suggested Redline

Guarantor shall be liable only for losses arising from fraud, intentional misrepresentation, or intentional diversion of receivables. No personal recourse shall arise from revenue decline, failed ACH, covenant breach, or inability of the business to perform.

CriticalIssue Score: 95/100

Renewal clause permits double-dipping of unpaid factor cost

Section 13

Why it's dangerous

If the merchant renews before payoff, the unpaid factor cost can be rolled into a new deal and charged again. This is classic double-dipping: the business may pay for the unearned portion of the old factor and then pay a new factor on top of it.

“Purchaser may, in its discretion, pay off the remaining balance and re-advance funds, with the unpaid factored balance included again in the new Purchased Amount.”(View in PDF)

Negotiation Tactic

Ask for a written example of a renewal payoff and new purchased amount to expose whether unearned charges are being rolled forward.

Suggested Redline

In any renewal or refinancing, the payoff of this Agreement shall exclude all unearned factor charges, default charges, and fees. No unpaid factored balance may be added to any new purchased amount, and no new origination or broker fee may be charged on refinanced amounts.

HighIssue Score: 93/100

Daily ACH debits create cash-flow strain and failed ACH is automatic default

Section 3; Section 11

Why it's dangerous

A fixed daily debit can drain working capital during slow periods, payroll cycles, or seasonal dips. Because any failed, blocked, or reversed ACH is a default, even a temporary bank issue can trigger acceleration and enforcement.

“Merchant authorizes Purchaser to debit the Fixed Daily Payment from Merchant's designated bank account every business day by ACH until the Purchased Amount is delivered in full.”(View in PDF)

Negotiation Tactic

Explain that daily fixed debits are operationally destabilizing and inconsistent with a true receivables purchase if payments do not flex with revenue.

Suggested Redline

Remittances shall be made weekly based solely on the Specified Percentage of actual collected receipts. A failed ACH shall not constitute default unless uncured for five business days after written notice.

Negotiation Email Draft

Subject: Requested revisions to MCA agreement dated June 1, 2026 Hello, Thank you for sending the agreement. I reviewed the terms carefully, and I cannot sign it in its current form. The main issues for me are: 1. The economics are too expensive. The agreement shows $100,000 funded and $149,000 to be delivered, plus a $5,000 origination fee, underwriting fee, ACH program fee, returned-ACH fees, default fee, and a broker/ISO commission out of proceeds. Please send a full funding statement showing gross funding, every deduction, net wired proceeds, and a payoff schedule by month. 2. The confession of judgment is not acceptable. Please remove Section 5 entirely. 3. The reconciliation provision is not workable as written. If this is truly a purchase of receivables, reconciliation needs to be mandatory based on actual receipts, not subject to your sole discretion. Please revise Section 4 so that I can request a monthly true-up with a response and adjustment within 3 business days. 4. The daily fixed ACH is too aggressive. I need either weekly remittances or a true percentage-based remittance tied to actual receipts, plus a cure period for any failed ACH. 5. The personal guaranty is too broad. I am willing to discuss a limited bad-act guaranty for fraud or intentional diversion of receivables, but not full personal recourse for ordinary business-performance issues. 6. The blanket lien is too broad. Please limit collateral to the specific receivables purchased and their identifiable proceeds, and confirm prompt UCC termination after payoff. 7. The anti-stacking default must be removed or narrowed so I can obtain additional financing if needed. 8. The no-prepayment-discount clause is not acceptable. If I pay early, the payoff should reflect unearned factor being removed. 9. The default section is too broad. A failed ACH, bank-account change, revenue decline, or additional financing should not automatically trigger acceleration, judgment, lien enforcement, and guarantor liability. Please add written notice and cure periods. 10. The renewal language appears to allow unpaid factor to be rolled into a new deal. Please revise Section 13 so that any renewal or refinance credits all unearned factor and does not include unpaid factored balance again in a new purchased amount. 11. New York exclusive venue and jury waiver are also concerns, especially combined with the confession of judgment. If you want to move forward, please send a revised draft addressing the points above, along with: - final net funding amount to be wired - all fees in exact dollars - sample payoff amounts at 30, 60, and 90 days - confirmation of how reconciliation works in practice - confirmation that any UCC will be terminated immediately after payoff I am open to continuing the discussion if the structure is revised to something commercially reasonable. Best, Business Owner Daylight AI Analysis

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