Welcome to Delancey Street. If you're reading this, you probably already know something is off with your MCA funder. Maybe the calls got more aggressive. Maybe you got a letter that didn't look like the usual collection notice. You're right to be worried.

Here are the 8 signs that your funder is gearing up to take you to court.

1. The Daily ACH Attempts Suddenly Stop

This one throws people off. You'd think if a funder stops pulling from your account, that's a good thing. It's not. When a funder stops attempting the daily debit, it usually means they've given up on collecting through the normal channel and they're preparing to collect through a legal one.

Think about it — why would a funder voluntarily stop trying to get paid? They wouldn't. Unless they've decided the lawsuit is going to get them more money than the daily ACH ever will. When the debits go quiet, that's not relief. That's the calm before the process server shows up.

2. You Get a "Demand Letter" or "Notice of Default"

This is the most obvious sign and somehow people still ignore it. If you receive a formal letter — usually from the funder's attorney, not the funder itself — stating that you are in default and demanding immediate repayment of the full purchased amount, that is a pre-litigation move. Full stop.

Most demand letters give you 5 to 10 days to respond. Many business owners read these, panic, and then do absolutely nothing. That's the worst possible move. A demand letter is not a suggestion. It's the funder's attorney building a paper trail so they can tell a judge, "We gave them a chance to cure and they ignored us."

3. Your Funder Assigns Your Account to an Outside Attorney

When your account moves from the funder's in-house collections team to an external law firm, the math has changed. In-house collectors get paid salary. Outside attorneys get paid on recovery — and they recover by filing lawsuits, obtaining judgments, and freezing bank accounts.

The shift from collections to legal is the single biggest escalation signal you'll see. And you might not even notice it happening. The tell: the phone number changes, the letterhead changes, and the tone of the communication shifts from "let's work something out" to "you have X days to respond."

4. Someone Contacts Your Payment Processor or Customers Directly

If your credit card processor calls you and says the MCA funder (or their attorney) sent a UCC intercept notice — that's not collections anymore. That's asset seizure. They're telling your processor to redirect your receivables to them. Directly.

Some funders will go further and contact your customers. They'll send notices to anyone listed on your bank statements who pays you, instructing them to redirect payments. This is legal (the UCC-1 they filed when you took the advance gives them this right), and it's a sign that litigation is either imminent or already filed. If your customers are getting letters from your funder, you are out of time.

5. You Get Served With a Confession of Judgment — Or Learn One Was Filed

Here's where most business owners get blindsided. If you signed an MCA agreement in New York (and many MCAs are governed by New York law regardless of where your business is located), there's a good chance you also signed a confession of judgment (COJ). That means the funder can obtain a judgment against you without suing you first. No hearing, no trial, no chance to argue.

Many business owners don't even know a judgment has been entered until their bank account gets frozen. That's not an exaggeration. You wake up, try to run payroll, and the money is gone. If you signed a COJ, the funder doesn't need to warn you. They just file it.

Note: New York banned out-of-state COJs in 2019, but if your business is in New York, or the agreement is governed by New York law, COJs are still enforceable. And some funders file them anyway and dare you to challenge it.

6. You Receive a Temporary Restraining Order (TRO) on Your Bank Accounts

This is the big one. A TRO can freeze your personal and business bank accounts — sometimes within 24 to 48 hours of being filed. The funder doesn't need your permission. They don't need to notify you in advance. A judge signs the order, it gets sent to your bank, and your accounts are locked.

You cannot pay rent. You cannot pay employees. You cannot buy inventory. The money is there, you can see it, but you can't touch it. Business owners who've been through this describe it as the single most destabilizing moment of the entire default process. And it happens fast. If you're seeing other signs on this list and you haven't moved your strategy forward yet — this is what's coming.

7. The Funder Files a UCC Amendment or Additional Liens

Go check the Secretary of State's UCC filing database for your state. If your funder has filed additional UCC-1 amendments, continuation statements, or new liens after you started missing payments, they're positioning for litigation. They're tightening the noose on your collateral before they go to court.

This is a move most business owners never check for, because most business owners don't know the UCC database exists. But funders and their attorneys live in that database. Every new filing is a signal: they're building their legal position, and they're doing it while you're still trying to figure out what's happening.

8. Communication Goes Completely Silent

This is the scariest one. And it seems counterintuitive. You've been getting harassed — daily calls, aggressive emails, threats — and then suddenly, nothing. Radio silence.

That silence is not them giving up. That silence is them preparing.

When a funder or their attorney goes quiet after a period of aggressive collection activity, it almost always means the file has been handed to litigation counsel, the complaint is being drafted, and the next communication you receive will be from a process server or a court. Most business owners interpret silence as "they must have moved on." They haven't. They're loading the gun.

What You Should Do If You're Seeing These Signs

If you're checking off two or more of these signs, you are not in a "maybe they'll sue" situation. You're in a "they're about to sue" situation. And the worst thing you can do is wait.

Here's what matters right now:

  • Do not ignore demand letters. Every day you don't respond is a day the funder uses against you in court.
  • Do not close your bank account and open a new one. This is a default trigger under virtually every MCA agreement, and it gives the funder more ammunition, not less.
  • Do not take on more financing to cover the payments. Stacking is itself a default under most MCA contracts, and it makes the legal situation exponentially worse.
  • Talk to an attorney who specializes in MCA defense. Not a general business attorney. Not your cousin who does real estate closings. Someone who has handled MCA litigation and knows how these funders operate.

At Delancey Street, we work with business owners who are in exactly this position — behind on payments, staring down legal threats, and not sure what move to make next. We're attorney-owned, we understand MCA agreements inside and out, and we've negotiated directly with the funders and their law firms hundreds of times.