Dealing with UCC filings and Merchant Cash Advance (MCA) lawsuits can quickly become a nightmare for business owners in California. A growing number of small and mid-sized businesses have turned to MCAs for fast funding, only to find themselves entangled in aggressive collections, legal threats, and frozen accounts. If you’re facing such challenges, a skilled Merchant Cash Advance Attorney California can provide much-needed clarity and support.
Understanding UCC Filings in MCA Agreements
When a business accepts funding through a merchant cash advance, the funder typically files a UCC-1 (Uniform Commercial Code) financing statement with the state. This filing establishes a public lien on the borrower’s assets, signaling that the funder has a secured interest in the business’s receivables and sometimes even its equipment or inventory.
While a UCC filing itself isn’t illegal or necessarily problematic, it becomes a serious concern when:
- The lien impedes the business from obtaining additional funding.
- The funder enforces aggressive collection practices.
- There’s a dispute over the validity or terms of the MCA.
It’s important to remember that UCC filings are not judgments but public claims. However, they can lead to severe consequences if not properly challenged or negotiated.
MCA Lawsuits: What California Business Owners Need to Know
MCA contracts are not traditional loans. They’re structured as purchases of future receivables, which means they’re often unregulated by state usury laws. While this loophole benefits funders, it places merchants at significant risk—especially when sales decline and daily withdrawals remain fixed.
In California, MCA funders often resort to lawsuits when a business misses payments. They may also:
- Freeze merchant accounts through aggressive legal tactics.
- File a lawsuit in a jurisdiction outside of California.
- Enforce confessions of judgment (in states that allow them).
The state’s business-friendly legal climate doesn’t always protect small business owners from these challenges. That’s why it’s critical to act fast and consult experienced merchant lawyers who understand both federal and California-specific UCC law.
How to Respond to a UCC Lien or Lawsuit
If your business is facing a UCC lien or legal action from an MCA funder, here are essential steps to take:
- Don’t ignore the filing or legal notice– Time is crucial in these cases. A delayed response may limit your defense options.
- Review the original MCA agreement– Many contracts contain vague, misleading, or even predatory terms.
- Check the validity of the UCC filing– An improperly filed UCC lien can be challenged and potentially removed.
- Gather all business financial records– Proving payment hardship or contract misrepresentation can support settlement or dismissal.
- Seek professional legal help– Having an attorney who regularly handles MCA lawsuits ensures a proper strategy is built from day one.
The California Legal Landscape
While some states have cracked down on abusive MCA practices, California’s laws remain less restrictive, making the state a hotbed for funders targeting local merchants. However, California courts are increasingly skeptical of funders misrepresenting MCA agreements as non-loans while enforcing loan-like collections.
Many business owners are unaware that they have legal defenses available, such as:
- Lack of good faith in contract enforcement
- Usury law violations (if the MCA is reclassified as a loan)
- Fraudulent misrepresentation or deceptive practices
When approached correctly, even UCC liens can be negotiated or terminated without litigation.
Conclusion: Legal Protection Starts with the Right Partner
Facing an MCA lawsuit or struggling with a UCC lien in California can be overwhelming—but you don’t have to handle it alone. Grant Phillips Law has a proven track record of defending business owners from predatory funders, negotiating settlements, and removing burdensome UCC liens. If your business is under legal or financial stress due to a merchant cash advance, connect with a team that knows the landscape and fights for your rights.
