Can an MCA Funder Freeze Your Business Bank Account?
By Century Relief ·
Quick answer
In most cases, a merchant cash advance funder can't freeze your business bank account just because you missed payments. It usually needs a court judgment first. Once it has one, it can ask your bank to restrain the account, and the bank must comply. The weeks between a missed payment and a judgment are when you have the most options.
How a freeze actually happens
- You miss or block payments. The funder sends a default notice and may demand the full remaining balance.
- The funder goes to court. It files a lawsuit, often in New York, where many MCA contracts say disputes will be heard. See what to expect when an MCA company sues you.
- The funder gets a judgment. This can come quickly if you don't respond to the lawsuit.
- The funder serves your bank. With a judgment, it can send the bank a restraining notice. The bank then freezes funds up to the amount owed.
Some older MCA contracts include a confession of judgment, a signed statement that lets the funder skip most of the lawsuit. New York stopped accepting these against businesses outside the state in 2019, but they still show up in contracts.
What a funder can do without a judgment
- Keep debiting your account through the ACH authorization you signed.
- File or enforce a UCC lien on your receivables.
- Contact your customers or payment processors and ask them to pay the funder directly, if the contract allows it. See what to do when your MCA funder contacts your customers.
What to do before it gets to a freeze
- Read your contract. Find the reconciliation clause, the default terms and where lawsuits are filed.
- Ask for a reconciliation. Many MCA contracts let you request lower payments when sales drop. Ask in writing.
- Don't open a new advance to cover the old one. Stacking usually makes the daily debits worse.
- Respond to any lawsuit. A missed court deadline is the fastest path to a judgment.
- Get help early. A settlement firm can negotiate with funders before they sue. If a funder has already filed suit, you need an attorney.
How Century Relief helps
Century Relief negotiates with MCA funders for business owners nationwide to reduce or restructure payments. If a funder sues, we hire an independent attorney on the client's behalf. Results vary, and no one can guarantee a funder will settle.