Legal Glossary for Merchant Cash Advance and Business Litigation Terms
CredibleLaw’s Legal Glossary explains legal and financial terms commonly associated with merchant cash advance disputes, commercial litigation, bank levies, account freezes, UCC liens, and small business financing conflicts.
This page is designed to help business owners, operators, and financial decision-makers quickly understand the terminology they may encounter when researching lawsuits, enforcement actions, or lender disputes.
Navigating a merchant cash advance dispute, a bank levy, or any form of commercial litigation is stressful enough without having to decode the legal terminology involved. CredibleLaw created this legal glossary to give small business owners a clear, straightforward reference for the terms they are most likely to encounter when facing MCA lawsuits, creditor enforcement actions, UCC lien filings, account freezes, and business debt collection proceedings.
Every definition below is written from the perspective of practitioners who have spent years working on these cases. We explain what each term actually means in the context of a real dispute, not just its textbook definition. Where a term connects to a broader strategy or a common enforcement tactic, we explain that connection so you can understand the full picture. Throughout this glossary you will find links to in-depth CredibleLaw guides, attorney referral resources, and actionable next steps.
If you are currently facing a merchant cash advance emergency, do not wait. Visit our MCA Emergency Help page or connect with an MCA Lawsuit Defense Attorney immediately.
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Most Common Legal Terms Businesses Search
These are some of the most frequently searched terms related to merchant cash advance disputes, business debt enforcement, and commercial litigation.
Bank Levy
A legal mechanism through which a creditor with a court judgment directs the business’s bank to turn over funds held in the account. The bank is legally required to comply.
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Account Freeze
An immediate restriction on access to funds in a business or personal bank account, typically imposed by the bank in response to a legal order from a creditor.
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Merchant Cash Advance
A commercial financing arrangement in which a funding company purchases a portion of a business’s future receivables at a discount, providing an upfront lump sum in exchange.
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UCC Lien
A legal claim filed under the Uniform Commercial Code against a business’s assets, giving the creditor a security interest and affecting the business’s ability to obtain additional financing.
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Default Judgment
A judgment entered by the court when a defendant fails to respond to a lawsuit within the required time, giving the funder legal authority to pursue aggressive collection actions.
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Confession of Judgment
A contractual clause in which the business owner agrees in advance to allow the funder to obtain a court judgment without filing a lawsuit or providing notice.
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How to Use This Legal Glossary
This legal glossary is part of CredibleLaw’s comprehensive resource library for small business owners facing merchant cash advance disputes, commercial litigation, and creditor enforcement actions. Each definition is written to provide practical context, not just academic explanations. If you are researching a specific legal issue, use the internal links throughout this glossary to access detailed guides, attorney referral resources, and emergency response pages.
The legal and financial landscape around merchant cash advances continues to evolve. Courts in multiple jurisdictions are actively shaping the law around MCA agreements, confession of judgment clauses, and the distinction between purchases of receivables and loans. CredibleLaw updates this glossary regularly to reflect current legal developments and enforcement trends.
For personalized guidance on your specific situation, connect with a qualified attorney through the CredibleLaw referral network. Visit CredibleLaw.com to explore all available resources.
Merchant Cash Advance Legal Terms
Merchant cash advances occupy an unusual space in commercial finance. Because they are structured as purchases of future receivables rather than loans, they operate under a different legal framework than traditional business lending. The terms below are central to understanding how MCA agreements work, how they are enforced, and where disputes most commonly arise.
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MCA ENFORCEMENT / BUSINESS FINANCE
ACH Withdrawal
Most merchant cash advance agreements require repayment through automated daily debits from the business’s bank account via the Automated Clearing House network. These daily ACH withdrawals are typically calculated as a fixed amount or a percentage of daily receivables. For businesses experiencing cash flow disruptions, the relentless pace of daily debits can accelerate financial distress. From a legal standpoint, the mechanism of withdrawal, whether it is a fixed daily amount or a true percentage of actual receivables, is often a key factor in determining whether the agreement is a legitimate purchase of future receivables or a disguised loan. Fixed daily withdrawals, regardless of actual business revenue, have been cited by courts as evidence that an agreement may function more like a loan than a purchase.
MCA ENFORCEMENT / BANK LEVY
Account Freeze
An account freeze occurs when a bank restricts access to a business’s funds, usually in response to a restraining notice or levy served by a creditor. During a freeze, the business cannot withdraw funds, write checks, or make electronic transfers. The freeze may apply to the full balance or a specific amount. Account freezes in MCA disputes frequently happen without advance notice, leaving the business unable to meet payroll, pay vendors, or cover essential operating expenses. Immediate legal intervention is often necessary to challenge the freeze or negotiate a partial release of funds.
A bank account freeze is an immediate restriction on access to funds in a business or personal bank account, typically imposed by the bank in response to a legal order from a creditor. In MCA disputes, account freezes often occur after a judgment is entered through a confession of judgment or a default judgment. The freeze can immobilize a business within hours, cutting off access to payroll funds, vendor payments, and operating capital.
Related resources: MCA Froze My Bank Account | Merchant Cash Advance Emergency Help
MCA ENFORCEMENT / JUDGMENT ENFORCEMENT
Asset Seizure
Asset seizure is the legal process by which a creditor takes possession of a debtor’s property to satisfy a judgment. In business disputes, asset seizure can target equipment, inventory, vehicles, accounts receivable, or other tangible business property. The creditor must typically obtain a writ of execution from the court before a sheriff or marshal can execute the seizure. In MCA cases, asset seizure is less common than bank levies but remains a viable enforcement tool, particularly when the funder holds a UCC lien against specific business assets.
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MCA ENFORCEMENT / BANK LEVY
Bank Levy
A bank levy is a legal mechanism through which a creditor with a court judgment directs the business’s bank to turn over funds held in the account. The bank is legally required to comply. When a levy is served, the bank typically freezes the account and remits the available funds to the creditor or the court. Bank levies can devastate a small business because they remove operating capital without warning. In the MCA context, levies often follow a default judgment or a confession of judgment. Responding quickly is essential. An attorney may be able to challenge the levy by contesting the underlying judgment, asserting exemptions, or negotiating a release of funds.
A business bank levy is the legal seizure of funds from a business bank account to satisfy a court judgment. Unlike a freeze, which restricts access, a levy actually removes the money from the account and transfers it to the creditor. Levies are executed by the bank upon receiving a proper legal order. The speed at which levies can occur in MCA cases, sometimes within days of a judgment being entered, makes immediate legal response essential.
Related resources: Stop MCA Bank Levy | Merchant Cash Advance Emergency Help
COMMERCIAL LITIGATION / MCA DISPUTES
Breach of Contract
Breach of contract is the legal claim that one party failed to perform its obligations under a binding agreement. In MCA litigation, the funder typically alleges that the business breached the merchant cash advance agreement by failing to maintain the required bank balance, closing or changing bank accounts, or otherwise interfering with the funder’s ability to collect its purchased receivables. The business may assert defenses including that the agreement was unconscionable, that the funder breached first by withdrawing more than the agreed percentage, or that the contract should be voided because it constitutes an illegal loan.
MCA ENFORCEMENT / BANK LEVY
Business Bank Levy
A business bank levy is the legal seizure of funds from a business bank account to satisfy a court judgment. Unlike a freeze, which restricts access, a levy actually removes the money from the account and transfers it to the creditor. Levies are executed by the bank upon receiving a proper legal order. The speed at which levies can occur in MCA cases, sometimes within days of a judgment being entered, makes immediate legal response essential.
Related resources: Stop MCA Bank Levy
COMMERCIAL LITIGATION / BUSINESS FINANCE
Business Debt Collection Lawsuit
A business debt collection lawsuit is a legal action brought by a creditor to recover unpaid commercial debts. While similar to consumer debt collection, business debt collection lawsuits operate under different rules. Many of the consumer protections provided by the Fair Debt Collection Practices Act do not apply to commercial debts. This means creditors pursuing business debts may use more aggressive tactics and face fewer regulatory constraints. Defending against a business debt collection lawsuit requires understanding both the substantive claims and the procedural rules of the court where the case is filed.
Related resources: MCA Emergency Help
BUSINESS FINANCE / DEBT RESTRUCTURING
Business Debt Restructuring
Business debt restructuring is the process of renegotiating the terms of outstanding debt obligations to create a more manageable repayment schedule. Restructuring may involve reducing the total balance owed, extending the repayment period, lowering payment amounts, or converting multiple debts into a single obligation. In the MCA context, restructuring often requires negotiating directly with funders who may be reluctant to modify terms unless the alternative is collecting nothing. An experienced attorney or debt restructuring specialist can assess whether restructuring, settlement, or litigation offers the best path forward.
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COMMERCIAL LITIGATION / MCA LAWSUITS
Civil Complaint
A civil complaint is the formal document that initiates a lawsuit. It identifies the parties, states the factual allegations, specifies the legal claims, and requests relief, usually monetary damages. When an MCA funder files a civil complaint, it typically alleges breach of the MCA agreement and seeks recovery of the outstanding balance, plus fees, interest, and legal costs. For the business owner, receiving a civil complaint triggers critical deadlines. Failing to respond within the required timeframe, usually 20 to 30 days depending on the jurisdiction, can result in a default judgment.
SECURED LENDING /UCC
Collateral
Collateral is the property or assets pledged to secure a debt. In merchant cash advance agreements, the collateral is often broadly defined to include all business assets, receivables, inventory, equipment, and sometimes even intellectual property. The breadth of the collateral description in many MCA agreements gives the funder sweeping enforcement rights if the business defaults.
COMMERCIAL LITIGATION / MCA DISOUTES
Commercial Litigation
Commercial litigation encompasses lawsuits arising from business-to-business disputes, including breach of contract claims, debt collection actions, fraud allegations, and enforcement of financing agreements. In the MCA context, commercial litigation most often involves a funder suing a business for breach of the MCA agreement, or a business bringing counterclaims alleging that the MCA was actually an illegal loan or that the funder engaged in fraudulent practices. These cases are heard in civil courts, and the outcomes depend on contract interpretation, the applicable state law, and the specific facts of the dispute.
MCA ENFORCEMENT / LITIGATION
Confession of Judgment (COJ)
A confession of judgment is a contractual clause in which the business owner or personal guarantor agrees in advance to allow the funder to obtain a court judgment without filing a lawsuit or providing notice. The funder simply files an affidavit with the court, and a judgment is entered. Confessions of judgment have been a central issue in MCA litigation for years. New York, historically the most common jurisdiction for COJ filings, enacted significant restrictions in 2019, and other states have followed with their own limitations. However, many older MCA agreements still contain COJ clauses, and some funders attempt to enforce them in jurisdictions that still permit them. If you signed an MCA agreement with a confession of judgment clause, understanding whether it is enforceable in your jurisdiction is one of the most important legal questions you face.
Related resources: MCA Lawsuit Defense
BUSINESS FINANCE / MCA DISPUTES
Creditor
A creditor is any individual or entity to whom a debt is owed. In MCA disputes, the creditor is typically the funding company that purchased the future receivables. However, MCA agreements are frequently assigned or sold to third parties, which means the creditor pursuing enforcement may not be the original funder. Identifying the correct creditor and verifying that it has standing to enforce the agreement is an important early step in any MCA defense.
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MCA ENFORCEMENT / BUSINESS FINANCE
Daily ACH Withdrawal
Most merchant cash advance agreements require repayment through automated daily debits from the business’s bank account via the Automated Clearing House network. These daily ACH withdrawals are typically calculated as a fixed amount or a percentage of daily receivables. For businesses experiencing cash flow disruptions, the relentless pace of daily debits can accelerate financial distress. From a legal standpoint, the mechanism of withdrawal, whether it is a fixed daily amount or a true percentage of actual receivables, is often a key factor in determining whether the agreement is a legitimate purchase of future receivables or a disguised loan. Fixed daily withdrawals, regardless of actual business revenue, have been cited by courts as evidence that an agreement may function more like a loan than a purchase.
DEBT RESOLUTION / MCA DISPUTES
Debt Settlement
Debt settlement is the negotiation of a reduced payoff amount to resolve an outstanding obligation. In MCA disputes, settlement often involves offering the funder a lump sum that is less than the full balance in exchange for a complete release of claims, dismissal of any pending litigation, and termination of UCC filings. Settlements are typically expressed as a percentage of the outstanding balance, and the achievable discount depends on factors including the strength of the funder’s legal position, the business’s financial condition, and the cost and uncertainty of continued litigation.
BUSINESS FINANCE / MCA DISPUTES
Debtor
A debtor is the individual or business entity that owes a debt or obligation. In the MCA context, the debtor is the business that received the advance. If the agreement includes a personal guaranty, the individual guarantor is also a debtor with personal liability for the business’s obligation.
COMMERCIAL LITIGATION / MCA LAWSUITS
Default Judgment
A default judgment is entered by the court when a defendant fails to respond to a lawsuit within the required time. In MCA litigation, default judgments are disturbingly common because many business owners either do not understand the legal process, cannot afford an attorney, or mistakenly believe that ignoring the lawsuit will make it go away. A default judgment gives the funder the legal authority to pursue aggressive collection actions including bank levies, asset seizures, and wage garnishments against personal guarantors. Vacating a default judgment is possible but requires showing a valid excuse for the failure to respond and a meritorious defense to the underlying claims.
Related resources: MCA Lawsuit Defense Attorney
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MCA TERMS / BUSINESS FINANCE
Factor Rate
The factor rate is the multiplier applied to the funded amount that determines the total repayment obligation in a merchant cash advance. For example, a factor rate of 1.35 applied to a $100,000 advance means the business must remit $135,000 in total. Factor rates are not the same as annual percentage rates, and converting a factor rate to an effective APR often produces figures that would be considered extraordinary in the traditional lending context. One of the reasons MCA disputes become contentious is that business owners sometimes do not fully appreciate the cost implications of the factor rate at the time of signing. In litigation, borrowers may argue that the factor rate, when combined with the short repayment window, creates terms that are unconscionable or that the agreement should be recharacterized as a usurious loan.
BUSINESS FINANCE / MCA DISPUTES
Financial Covenant
A financial covenant is a contractual requirement that the borrower or business maintain specified financial metrics, such as minimum revenue levels, bank balances, or debt-to-income ratios. Breaching a financial covenant can trigger default even if the business is current on its payments. In MCA agreements, financial covenants are sometimes embedded in the contract language and may not be clearly labeled as such, making it easy for business owners to inadvertently violate them.
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COMMERCIAL LITIGATION / MCA ENFORCEMENT
Judgment Enforcement
Judgment enforcement refers to the collection actions a creditor takes after obtaining a court judgment. Available enforcement mechanisms include bank levies, wage garnishments, property liens, asset seizures, and information subpoenas requiring the debtor to disclose financial information. In MCA litigation, funders who obtain judgments, whether through contested proceedings, default judgments, or confessions of judgment, often pursue multiple enforcement avenues simultaneously to maximize collection pressure.
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COMMERCIAL LITIGATION / MCA DISPUTES
Legal Damages
Legal damages refer to the monetary compensation a court awards to the prevailing party. In MCA disputes, damages typically include the unpaid balance of the advance, contractual fees, attorney’s fees if the agreement provides for them, and sometimes consequential damages. In cases where the business brings counterclaims, damages could include the return of excessive payments, statutory penalties for usury violations, or compensation for losses caused by improper enforcement actions such as wrongful bank levies.
SECURED LENDING / UCC
Lien
A lien is a legal claim against property that secures the payment of a debt or obligation. Liens can be voluntary, such as a mortgage or a UCC filing, or involuntary, such as a tax lien or judgment lien. In MCA disputes, the funder’s UCC lien is a primary enforcement tool. The presence of liens on business assets restricts the owner’s ability to sell, transfer, or refinance those assets without first satisfying or negotiating the release of the lien.
BUSINESS FINANCE / MCA DISPUTES
Loan Default
A lien is a legal claim against property that secures the payment of a debt or obligation. Liens can be voluntary, such as a mortgage or a UCC filing, or involuntary, such as a tax lien or judgment lien. In MCA disputes, the funder’s UCC lien is a primary enforcement tool. The presence of liens on business assets restricts the owner’s ability to sell, transfer, or refinance those assets without first satisfying or negotiating the release of the lien.
BUSINESS FINANCE / MCA ENFORCEMENT
Loan Enforcement
Loan enforcement encompasses the legal and administrative actions a creditor takes to collect on a defaulted obligation. Enforcement can include filing lawsuits, obtaining judgments, executing bank levies, seizing assets, garnishing wages of personal guarantors, and filing or enforcing UCC liens. In MCA disputes, enforcement actions often proceed rapidly and on multiple fronts. Early legal intervention is the most effective way to manage enforcement risk and protect business assets.
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MCA TERMS / BUSINESS FINANCE
Merchant Cash Advance (MCA)
A merchant cash advance is a commercial financing arrangement in which a funding company purchases a portion of a business’s future receivables at a discount, providing an upfront lump sum in exchange. Unlike a traditional term loan, an MCA does not carry a stated interest rate. Instead, the funder applies a factor rate that determines the total amount the business must repay through daily or weekly remittances. Because MCAs are legally structured as purchase agreements rather than lending instruments, they generally fall outside the scope of state usury laws and many consumer lending regulations. This distinction is the foundation of most MCA litigation. When disputes arise, one of the central legal questions is often whether the agreement functions as a true purchase of receivables or whether it is, in substance, a loan subject to lending regulations. Courts have reached different conclusions depending on jurisdiction and the specific contract language involved.
Related resources: MCA Emergency Help | MCA Lawsuit Defense Attorney
MCA TERMS / MCA ENFORCEMENT
MCA Default
Default under a merchant cash advance agreement typically occurs when the business fails to maintain sufficient funds in its bank account to cover the scheduled ACH withdrawals, breaches a material term of the agreement, or takes actions the funder considers detrimental to its ability to collect. Some MCA contracts define default very broadly, including scenarios such as changing bank accounts without notice, declining revenue below a threshold, or failing to maintain a minimum daily balance. Once a funder declares default, it may accelerate the remaining balance, initiate litigation, file a confession of judgment, or pursue asset enforcement. Understanding the specific default triggers in your contract is critical because the definition of default in many MCA agreements is far more expansive than most business owners realize.
Related resources: MCA Lawsuit Defense Attorney
MCA ENFORCEMENT / COMMERCIAL LITIGATION
MCA Enforcement Action
An MCA enforcement action refers to the legal steps a merchant cash advance funder takes to collect on a defaulted agreement. Enforcement actions can include filing a civil lawsuit for breach of contract, entering a confession of judgment if the agreement contains such a clause, obtaining a bank levy or account freeze, filing or enforcing a UCC lien against business assets, or pursuing the personal guarantor. Funders often move aggressively and simultaneously on multiple fronts. It is not unusual for a business owner to discover that a judgment has been entered, a bank account has been frozen, and a UCC lien has been filed within days of the funder declaring default. Speed is a deliberate part of the enforcement strategy, and business owners who delay seeking legal counsel often find themselves at a significant disadvantage.
Related resources: Stop MCA Bank Levy | MCA Froze My Bank Account
MCA LAWSUITS / COMMERCIAL LITIGATION
Merchant Cash Advance Lawsuit
A merchant cash advance lawsuit is a civil action filed by an MCA funder against a business, its owners, or its personal guarantors, alleging breach of the MCA agreement and seeking recovery of the outstanding balance. These lawsuits may be filed in state or federal court depending on the amount in controversy and the parties’ locations. MCA lawsuits often move quickly, and the funder may seek expedited relief such as temporary restraining orders or preliminary injunctions to prevent the business from dissipating assets. Early engagement with an attorney experienced in MCA defense is critical.
Related resources: MCA Lawsuit Defense Attorney
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SECURED LENDING / UCC
Priority of Lien
Priority of lien refers to the order in which competing creditors are entitled to satisfy their claims from the debtor’s assets. Generally, the first creditor to properly file a UCC-1 financing statement has priority over later filers. In stacked MCA situations, determining lien priority becomes critical because multiple funders may claim the same assets. The priority determination affects each creditor’s recovery and influences settlement negotiations.
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SECURED LENDING / UCC
Secured Creditor
A secured creditor is a lender or funding company that holds a security interest in specific assets of the debtor, typically perfected through a UCC-1 filing. Secured creditors have priority over unsecured creditors in the event of default or bankruptcy. In the MCA context, the funder’s status as a secured creditor gives it significant leverage because it can enforce its security interest against the business’s assets ahead of other creditors.
COMMERCIAL LITIGATION / DEBT RESOLUTION
Settlement Agreement
A merchant cash advance lawsuit is a civil action filed by an MCA funder against a business, its owners, or its personal guarantors, alleging breach of the MCA agreement and seeking recovery of the outstanding balance. These lawsuits may be filed in state or federal court depending on the amount in controversy and the parties’ locations. MCA lawsuits often move quickly, and the funder may seek expedited relief such as temporary restraining orders or preliminary injunctions to prevent the business from dissipating assets. Early engagement with an attorney experienced in MCA defense is critical.
Related resources: MCA Lawsuit Defense Attorney
MCA TERMS / MCA ENFORCEMENT
Stacked Merchant Cash Advance
Stacking refers to the practice of a business taking on multiple merchant cash advances simultaneously, often from different funders. This creates overlapping daily withdrawal obligations that can consume a significant portion of daily revenue. Stacking is one of the most common paths to default in the MCA industry. When multiple funders are debiting the same bank account, the business often reaches a point where it cannot sustain operations. In litigation, stacking can complicate matters because each funder may have its own UCC lien filing, its own confession of judgment clause, and its own enforcement timeline. Determining priority among competing creditors becomes a significant legal issue in stacked MCA situations.
Related resources: MCA Emergency Help
COMMERCIAL LITIGATION / MCA LAWSUITS
Summary Judgment
Summary judgment is a procedural motion asking the court to decide the case, or specific issues within the case, without a full trial. The moving party argues that there are no genuine disputes of material fact and that it is entitled to judgment as a matter of law. In MCA litigation, funders frequently move for summary judgment, arguing that the contract terms are clear and that the business indisputably failed to perform. Defending against summary judgment often requires presenting evidence that creates factual disputes, such as evidence that the agreement is actually a loan, that the funder’s conduct was fraudulent, or that the default was caused by the funder’s own breach.
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SECURED LENDING / UCC
Uniform Commercial Code (UCC)
The Uniform Commercial Code is a comprehensive set of laws governing commercial transactions in the United States. Article 9 of the UCC, which deals with secured transactions, is particularly relevant to merchant cash advance disputes. MCA funders routinely file UCC financing statements to establish a security interest in the business’s assets. The UCC provides the legal framework for determining the priority of competing creditors, the perfection of security interests, and the enforcement rights of secured parties. The Uniform Law Commission maintains the model code, which individual states adopt with varying modifications.
Related resources: Learn more at the Uniform Law Commission
SECURED LENDING / UCC
UCC-1 Financing Statement
A UCC-1 financing statement is a legal document filed with a state agency, usually the Secretary of State, to provide public notice that a creditor claims a security interest in specific assets of a debtor. In the MCA industry, funders file UCC-1 statements as a standard part of the funding process, often claiming a blanket lien on all business assets. A filed UCC-1 can prevent the business from obtaining additional financing because other lenders will see the existing lien and may refuse to extend credit. Challenging or terminating an improper UCC-1 filing is an important step in resolving MCA disputes.
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JUDGMENT ENFORCEMENT / MCA ENFORCEMENT
Writ of Execution
A writ of execution is a court order directing a law enforcement officer, typically a sheriff or marshal, to seize the debtor’s property to satisfy a judgment. The writ authorizes the officer to levy bank accounts, take possession of personal property, or sell real property. In the MCA enforcement context, writs of execution are used when the funder has obtained a judgment and seeks to collect against the business’s assets or the personal guarantor’s property.
Merchant Cash Advance Terms Every Business Should Understand
Merchant cash advance agreements involve terminology and enforcement concepts many owners have never encountered before problems arise. Understanding these terms before a dispute escalates can make a meaningful difference in your ability to respond effectively.
