Introduction to Merchant Cash Advances in Illinois
Illinois small business owners, listen up. This is for you. Merchant Cash Advances (MCAs) are lurking—promising you quick cash, but at a crippling cost. Let’s talk about how we, at Delancey Street, fight back. MCAs are not just loans. They are more than loans, and they are more than high interest. They are contracts designed to break businesses, break hopes, and break spirits. We’ve seen it, we fight it, and we win against it. We’re talking about tearing down their armor, clause by clause, loophole by loophole, judgment by judgment. Here’s how MCA defense lawyers dismantle MCA lenders—even when they look invincible.
Legal Defense Strategies
Strategy #1 – Confession of Judgment
- Ever heard of a Confession of Judgment? Imagine signing away your rights. No notice, no hearing, no defense. You blink, and suddenly, they’ve got a court judgment against you. Predatory? Absolutely.
- These clauses are everywhere in MCA contracts. Hidden deep, disguised cleverly, designed sneakily. They allow MCA lenders to get judgments without warning. No notice. No due process. Nothing. Just a frozen bank account, or seized assets.
- But Illinois law has our back—sometimes. We fight these confessions by showing they weren’t clearly disclosed. If a judge finds that you didn’t know what you were signing, they can and will throw it out. It happens. It will happen.
One bakery owner in Chicago had frozen accounts overnight. All because of a Confession of Judgment. We fought it. We proved it wasn’t clearly explained. And guess what? We got it reversed. That bakery kept going.
Strategy #2 – Proving Usury
MCAs call themselves “not a loan.” But we ask: if it walks like a loan, talks like a loan, collects like a loan—why isn’t it a loan? In Illinois, that matters. If it’s a loan, it must follow usury laws. Illinois caps interest at 9% per year for non-exempt loans. Most MCAs charge far more—often triple-digit effective interest. If we prove it’s a loan, those high rates become illegal, unenforceable, and sometimes they just vanish. In Kapitus Servicing, Inc. v. Suburban Waste Services, the judge denied summary judgment because there were no reconciliation procedures—no proof it was tied to sales, making it look like a disguised loan. And if it’s a loan? We fight under usury laws. We peel back the terms. We look at the interest, the repayments, the guarantees. If it looks like a loan, we call it a loan. And Illinois courts have agreed—lenders can’t dodge usury caps by changing names.
Reconciliation Rights Matter
- MCAs are supposed to take a share of your daily sales. But when sales dip, how often do they let you adjust payments? Rarely. The contract often lacks proper reconciliation provisions—and that’s where they break their own agreements.
- In Kapitus, the reconciliation clause was vague. There was no clear method to adjust payments if sales dropped. That’s not a purchase of receivables. That’s a disguised loan. We argue it; courts listen.
- MCA contracts thrive on ambiguity—unclear terms, vague conditions, hidden clauses. But Illinois courts don’t like ambiguity. If it’s unclear, courts will often interpret it in favor of the borrower. We use that.
A retail owner in Springfield faced payments that didn’t match sales. The reconciliation clause was ambiguous. We argued ambiguity favored our client. The judge agreed. Reduced payments. A partial win, but a critical one.
Why Partial Wins Matter
A complete win? Ideal, but not always realistic. Sometimes, a partial win makes the difference—reducing payments, extending timelines, removing personal guarantees. Breathing room—that’s often what businesses need to survive. MCAs often add personal guarantees—making you liable even if your business collapses. Imagine struggling, and then losing your house too. We fight to get these guarantees removed, especially if the underlying MCA terms are shady.
A small construction business in Chicago faced bankruptcy, and the MCA lender wanted personal assets. We challenged the underlying contract. The judge ruled the guarantee wasn’t enforceable. They kept their home.
Business Debt Relief – It’s Possible
Debt relief for MCAs isn’t a myth. It’s possible because these contracts are often flawed. They’re predatory. They’re unclear. And Illinois law gives us tools to fight back when they misrepresent themselves. Illinois’ Unfair and Deceptive Acts and Practices (UDAP) law helps. If an MCA deceives you, hides terms, or doesn’t explain itself—UDAP applies. We challenge the lender under UDAP for unfair practices, and it works. One restaurant in Peoria had an MCA called “not a loan,” yet it was enforced as one. Misrepresentation? You bet. Under UDAP, we argued deception. The judge made parts of the agreement unenforceable. That’s debt relief in action.
Refinancing as Relief
Debt relief isn’t always wiping debt clean—it’s making it manageable. Once an MCA contract gets weakened, refinancing through a traditional loan becomes possible. Lower rates. Fair terms. Legal protections. It’s how we get our clients to safer ground. MCAs say they aren’t loans. But if the lender takes no risk—if they’re guaranteed payment even in bankruptcy—how is that different from a loan? Courts in Illinois, California, and New York have begun to question this.
In a New York case, the judge ruled, “If it’s not a loan, there can be no usury.” But we say it is a loan, and Illinois courts have often followed this logic. No risk? Then it’s not really a sale. If an MCA contract says it enforces personal guarantees after bankruptcy, it shows they never took on risk. And without risk, how is it different from a secured loan? That’s what we argue, and courts have listened.
MCAs claim to buy your future sales—a True Sale. But if there’s no risk of loss on their part, it’s not a true sale. Illinois has supported the notion that sales carry risk—without risk, it’s a loan. We push this, and we win. Risk allocation is key. The less risk they bear, the more it resembles a loan. Illinois law implies that true sales involve risk—if the MCA takes none, courts lean toward reclassifying it as a loan, with all the consumer protections.
A retail owner faced daily payment demands, even when sales dipped. The contract lacked reconciliation terms, payments were fixed. We argued it wasn’t a true sale—it was an illegal loan. The judge agreed. Payments were reduced.
A client in Evanston had their accounts frozen by Confession of Judgment. We exposed improper disclosure, argued lack of clarity, and got the action reversed. These fights matter—they mean your business gets to keep breathing.
Why Illinois Courts Care About Ambiguity
Illinois courts, like any court, hate ambiguity when it works against the defendant. If the contract doesn’t spell it out—how the payments work, how to reconcile, how to determine default—then courts will read that in your favor. The beauty of ambiguity in contracts is that every unclear word, every vague phrase, every overlooked comma is our leverage. Every ambiguity becomes an opening for defense, an opening for fairness. Why fight back? Because MCA lenders think they’ve got you cornered. But the truth? They often use one-size-fits-all contracts, with clauses so poorly worded that a good lawyer can tear them apart—one ambiguity at a time.
Another strategy involves highlighting the lack of clear reconciliation rights. Imagine paying fixed sums even when revenue tanks—that’s not fair, and Illinois courts have the authority to fix that imbalance. We bring these inconsistencies to light. When sales drop, and the payments stay the same, that’s not a share in future sales—it’s a fixed loan payment. A contract like that is vulnerable in court. We show the inconsistency, we show the intent, and we push for a fair outcome.
One bakery in Peoria was paying an MCA that didn’t adjust payments, even when business slowed. We argued that this was more like a loan than a receivables purchase. The judge agreed. The debt was restructured, and the payments reduced. Having a clear reconciliation process means the MCA is supposed to adjust based on actual income—many contracts pretend to include this but fail to spell it out properly. That’s where our defense works best—exposing what’s missing.
True Sale Doctrine: If the lender bears no risk, it’s not a true sale. But MCAs love to pretend they’re taking on risk, all while guaranteeing themselves a payback. If we show they aren’t at risk, we show they’re violating Illinois lending laws. MCA lenders insist on guarantees, personal assets, and fixed payments. They say they’re purchasing receivables, but they act like lenders with fixed obligations. We show Illinois courts that they’re not at risk—they’re just predatory.
If you’re at all the risk, and the MCA gets guaranteed money back—then how is it different from a loan? We push this point, and judges listen. That’s why we use risk allocation as a cornerstone of our arguments.
There are cases—LG Funding, LLC v. United Senior Properties of Olathe—that outline how to assess if a deal is a loan or a true sale. It’s about reconciliation, finite terms, and who bears the risk. Illinois follows these ideas.
Highlighting Hidden Clauses
MCA agreements are often packed with hidden clauses—terms buried deep, written in ways hard to understand. We’ve had cases where those clauses were the crux—the weak link in their chain. Finding them, exposing them, winning on them—that’s what we do. In Joliet, a retailer faced a confusing MCA with buried terms about penalties. We showed that these were never clearly explained. The judge agreed, threw out the penalty clause, and suddenly the debt looked a lot more manageable.
MCAs want you to think personal guarantees are ironclad. They aren’t. If we prove the underlying MCA was deceptive or misrepresented, those guarantees can become void. Protecting your home, your savings—that’s a fight we win. Imagine having an MCA demand personal assets when the business struggles. Imagine losing your house. Now imagine your lawyer proving that the contract wasn’t fair, that the personal guarantee doesn’t apply. That’s what we do, one business at a time.
UDAP – Illinois Consumer Protection
Illinois’ UDAP law—Unfair and Deceptive Acts and Practices—is our tool to challenge deceptive MCA terms. If they lie, hide terms, or misrepresent what you’re signing, we use UDAP to attack those contracts and get you relief. UDAP law is about fairness. If the MCA contract was misleading, if the interest rates weren’t clear, if the reconciliation wasn’t transparent—we go after them. We’ve used this law successfully to bring lenders back to the table. In Peoria, a manufacturing business signed an MCA without realizing how aggressive the terms were. We used UDAP to show misrepresentation, had penalties removed, and renegotiated payments. A partial win? Yes. A lifesaver? Absolutely.
Refinancing – Step Toward Freedom
Refinancing through traditional loans is often the step towards freedom. Once we weaken an MCA, once we remove clauses or renegotiate terms, traditional lenders become an option—and at much lower rates. Traditional lenders charge far less than MCAs. They offer structured, regulated, predictable payments. They provide loans—not predatory advances. Getting to this point means your business can survive, can grow, can thrive.
If the MCA says they get to enforce personal guarantees even after bankruptcy, that’s a problem. It means they aren’t really at risk—they want you on the hook forever. We challenge these terms as being contrary to Illinois finance laws.
Remember the New York case: “If it’s not a loan, there can be no usury.” But if it is a loan? Usury applies. We argue Illinois follows this logic. If the lender takes no risk, it’s not a true sale. It’s a loan, with all the rules that apply.
The difference between a true sale and a loan? Risk. If they take your sales as repayment but guarantee they get paid no matter what, they’re acting like a lender. Illinois courts look at that risk difference and decide accordingly. Bankruptcy is supposed to protect you—to give you a fresh start. But MCAs often try to cut through bankruptcy protections by claiming they still have rights to personal guarantees. That’s not how Illinois law works, and we make sure the court knows it.
Why Courts Side with Borrowers
Illinois courts value fairness. They value clarity. If a contract is unclear, or if it was unfair in how it was presented, the borrower gets the benefit of the doubt. We use this, and we get our clients relief—partial or full, every win matters. Your business is your life—it’s your livelihood, your dream, your hard work. And yet, MCA lenders are ready to crush it, to break it apart with predatory terms. But these contracts aren’t ironclad. They can be fought, and they can be won against. We fight because we believe small businesses deserve fairness. We believe MCA lenders shouldn’t get away with high rates, vague terms, and unfair clauses. We fight because we’ve seen too many businesses struggle, and we know that legal help makes a difference.
Every case we take is about a business owner who deserves a chance. A chance to make things right, a chance to grow again. We fight for fairness in every clause, every word, every payment. That’s what Illinois MCA Defense is about. Illinois MCA Defense isn’t about mercy from lenders—it’s about standing up for what’s right. Challenging contracts, fighting deception, demanding clarity, ensuring fairness. Every battle we win, every debt we reduce, every business we help—it all matters. If you’re battling an MCA in Illinois, you don’t have to face it alone. Delancey Street is here. We know the fights, we know the contracts, we know the law. Let’s get you relief. Visit Delancey Street or call 212-210-1851. We’re here for you.
