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By Travis Yule — CEO & Founder, Full Send Funding
The first page sets the price; reconciliation, guaranty, UCC-1, default and confession-of-judgment clauses decide who bears a slow month, not the factor rate.
In one sentence: A merchant cash advance agreement is a sale of receivables whose first page sets the price and whose later clauses — reconciliation, guaranty, security interest, default and any confession of judgment — decide who bears the risk of a slow month, and can take back what the price promised without moving the factor rate.
A merchant cash advance agreement is a contract of sale, not a loan agreement, and every clause in it is either doing the work of making that sale real or quietly undoing it. The three numbers on the first page — the purchase price, the purchased amount and the specified percentage — describe the sale. The reconciliation clause is what makes the sale genuine, because it is the mechanism by which the funder actually bears the risk of a slow month. The guaranty, the security-interest clause, the events of default and the confession of judgment, where one appears, are the places where a funder can take that risk back without changing the price. Read in that order, the document is legible in twenty minutes.
The usual framing gets this backwards. Applicants read the factor rate, skim the rest and sign; the industry's own reputation problem comes almost entirely from the pages that were skimmed. Two agreements at the same 1.28 factor can be different products — one in which a bad quarter lengthens the term, and one in which a bad quarter is an event of default that accelerates the balance, triggers a personal guaranty of payment and, in the worst drafting still in circulation, produces a judgment before you have been served with anything. The price is the same. The contract is not.
This piece walks the agreement clause by clause: what each one does, how a court reads it, what the New York and California disclosure laws now force onto the first page, and what we do and do not put in ours — no UCC-1 filed against the business, no confession of judgment, and a fixed daily or weekly ACH remittance that, when it stops fitting the business's cash flow, is adjusted through a normal conversation rather than treated as a default. This is information, not legal advice; the statute and the contract control, and a commercial attorney in your state should read yours.
Most agreements in this industry run eight to fourteen pages and use the same architecture whatever the letterhead. The table below is the whole document in one screen, with the question to ask of each clause and where we stand on it.
The clause architecture common to advance agreements in this industry, read from the funder’s side; the last column is Full Send Funding’s own practice. The document you sign controls.
The rest of this article takes the rows in order.
An advance is the purchase of a fixed dollar amount of a business's future receivables at a discount. The funder pays the purchase price today; the business delivers the purchased amount as revenue arrives, by remitting a stated share of it. Nothing about that requires the word "loan", and the agreements are careful never to use it.
The reason is not cosmetic. A loan is repayable absolutely — the principal comes back whatever happens to the borrower's sales — and a loan is what state usury statutes regulate. A sale of receivables is contingent by construction: if the receivables are never generated, there is nothing to deliver, and the buyer's remedy is against the seller's conduct rather than against the seller's balance sheet. New York's appellate courts have put the test in one sentence: unless a principal sum advanced is repayable absolutely, the transaction is not a loan.[2] Everything a well-drafted agreement does is in service of that contingency, and everything a badly drafted one does erodes it.
Two consequences follow that most applicants never connect to the paperwork.
The buyer of receivables is a secured party under Article 9. The Uniform Commercial Code, as New York has enacted it, applies not only to security interests but to "a sale of accounts, chattel paper, payment intangibles, or promissory notes".[1] That is why a funder that insists it has made a purchase, not a loan, may nonetheless file a UCC-1 financing statement against the business: the filing perfects its ownership of the accounts it bought and stakes its priority against every later creditor. The filing is legally coherent. Whether it is proportionate to a four-month advance is a different question, and the one that matters to your next facility.
The remittance has to be capable of going down. If the funder is buying a share of revenue, the amount delivered each week must in principle track revenue. A fixed daily debit is a convenience — it is easier to model and easier to collect — but it is only consistent with a sale if something adjusts it when revenue falls. That something is the reconciliation clause, and it is the clause a court reads first.
When an agreement is challenged as a disguised loan, New York courts weigh three factors to decide whether repayment is absolute or contingent: whether there is a reconciliation provision in the agreement, whether the agreement has a finite term, and whether there is any recourse should the merchant declare bankruptcy.[2][3] The three factors are not a checklist to be ticked. They are three views of the same question — who bears the risk of the receivables not arriving — and two reported decisions from the same appellate court, three years apart, show how the answer turns on drafting.
Purchase price, purchased amount and remittance mechanism as stated in the two reported decisions. Implied factor is purchased amount ÷ purchase price; dollar cost is purchased amount − purchase price. Holdings summarised from the opinions.
In LG Funding v United Senior Properties of Olathe, the funder paid $100,990 for $129,267.20 of future receivables, to be delivered at 15% of daily revenue capped at $2,499 a week. The reconciliation clause said the funder "may, upon [United's] request, adjust the amount of any payment due under this Agreement at [its] sole discretion and as it deems appropriate". The Appellate Division held that discretionary wording, read with the rest of the agreement, left a triable issue of fact as to whether the transaction was a criminally usurious loan, because the provisions suggested the funder had not assumed the risk that the merchant would have less-than-expected or no revenues.[3] The funder lost its motion for summary judgment on a $28,277.20 discount because of the word "may".
In Principis Capital v I Do, the funder paid $38,429.39 for $52,456.12 of receivables, collected as a percentage of monthly sales. The agreement provided for adjustment of the monthly payment based on changes in the merchant's monthly sales, and because the payments could change, the term was not finite. The same court held the transaction was not a loan and granted the funder summary judgment.[2]
The two agreements are, on their first pages, nearly interchangeable — a purchase price, a purchased amount, a percentage. The difference between them is entirely in whether reconciliation was a right or a favour. That is the single most important sentence in this article, and it is why the clause order below starts where it does.
A third decision is worth knowing for a different reason. In Davis v Richmond Capital Group, merchants sued their funders alleging, among other things, that the funders had withdrawn unauthorized amounts and refused to permit reconciliation; the First Department sustained the contract claims against the funding companies.[4] Reconciliation is not only what saves an agreement from recharacterisation. Where the clause exists, refusing to honour it is a breach.
The economic terms are three numbers, and the relationship between them is fixed arithmetic.
The purchase price is what the funder pays — the advance amount, before any origination fee deducted at disbursement. If the agreement lists a fee, the money that lands is the purchase price less the fee, and every comparison should be run on that net figure.
The purchased amount is the fixed dollar total of receivables the funder has bought. Purchased amount ÷ purchase price is the factor rate, so the LG Funding agreement above is a 1.28 factor and the Principis agreement is 1.365. This number does not accrue, does not compound and does not change with time; on a genuine purchase, it is the ceiling on what the funder can ever collect.
The specified percentage is the share of receipts the funder has bought — 15% of daily revenue in LG Funding, a percentage of monthly sales in Principis. It is the term that makes the arrangement a purchase of a stream rather than a fixed instalment. The expected term of the agreement is derived from it: purchased amount ÷ (specified percentage × expected receipts) is the number of days or weeks the delivery should take, and if receipts come in below the estimate, the term extends rather than the remittance defaulting.
At $30,000 a month the delivery takes about 124 weeks and at $60,000 about 62; above roughly $72,000 a month the weekly cap binds and the term settles at 52 weeks.
The remittance terms of the agreement in LG Funding v United Senior Props. of Olathe: purchased amount $129,267.20, delivered at 15% of daily revenue capped at $2,499 a week. Weekly revenue = monthly revenue × 12 ÷ 52; weekly remittance = the lesser of 15% of weekly revenue and $2,499; weeks = $129,267.20 ÷ weekly remittance.
The figure runs the LG Funding terms across a range of monthly revenue. At $30,000 a month, 15% of receipts delivers $129,267.20 in about 124 weeks; at $60,000 a month, in 62. Above roughly $72,000 a month the weekly cap of $2,499 binds and the term settles at 52 weeks regardless of how well the business does. Two things to read off it. First, on a true specified-percentage structure the term is a consequence of revenue, not a term of the contract — which is why the finite-term factor is so closely tied to the reconciliation factor in the case law. Second, a cap on the remittance is the merchant's friend; a floor is not. Read which way any limit in your agreement points.
What we do: every offer we make states the purchase price, the purchased amount and the resulting total cost in dollars, in every state, whether or not that state requires it. The merchant cash advance page sets out the product, and how we make money sets out every fee we charge and the ones we do not.
Most agreements written today do not debit a literal percentage of each day's receipts. They estimate the merchant's receipts from the bank statements, multiply by the specified percentage and fix a daily or weekly ACH debit that approximates it. That is an operational convenience, and it is defensible only if the estimate can be corrected. The reconciliation clause is the correction.
Read it for three things.
Whether it is mandatory on request. "Shall adjust" against "may adjust at its sole discretion" is the Principis–LG Funding distinction, and it is the difference between a right and a favour.[2][3] A clause that gives the funder discretion to refuse gives the funder discretion to convert a slow quarter into a default.
What triggers it and what you must produce. A workable clause names the evidence — typically the most recent bank statements or processor statements — and the period over which actual receipts are compared with the estimate. It also gives the funder a defined number of days to respond. A clause with no evidence standard and no response deadline is one the funder can honour in principle and ignore in practice; that was the allegation sustained against the funders in Davis.[4]
Whether a correctly reconciled slow period is a default. It should not be. If the events-of-default clause treats a missed or reduced debit as a default without carving out a reconciliation in progress, the reconciliation right can be rendered useless by the clause two pages later.
Here is what the arithmetic looks like on a business we might fund. A restaurant averaging $90,000 a month in receipts takes a $75,000 advance at a 1.28 factor, so the purchased amount is $96,000. The specified percentage is 12%. On 21 banking days a month, average daily receipts are $4,285.71 and 12% of that is $514.29, so the fixed daily debit is set at $514.29 and the expected delivery takes about 187 banking days, or just under nine months.
Inputs: purchase price $75,000, factor 1.28, purchased amount $96,000, specified percentage 12%, estimated receipts $90,000 a month, 21 banking days a month. Daily receipts = monthly ÷ 21; reconciled remittance = 12% × daily receipts; the fixed debit is 12% of the estimated daily receipts ($514.29) and its share is that figure ÷ actual daily receipts; days to deliver = $96,000 ÷ reconciled remittance; months = days ÷ 21.
Now receipts fall. At $63,000 a month — a 30% drop, which is a bad quarter, not a catastrophe — a genuine 12% of receipts is $360 a day and the delivery stretches to about 267 banking days, or 12.7 months. The purchased amount has not changed by a dollar; the funder simply waits longer for it, which is the risk it was paid a $21,000 discount to bear. Without reconciliation, the same $514.29 debit keeps running and is now taking 17.1% of every dollar that comes in — and at $49,500 a month it is taking 21.8%, on a business whose margin was sized for 12%. That is not a slightly worse deal. It is a different contract, and it is the one that produces the second position a few weeks later, the mechanism described in the stacking trap.
What we do: we collect by a fixed daily or weekly ACH debit sized from the statements, and when that debit stops fitting the business's cash flow a structure adjustment is a normal conversation, not a default — call us before a payment is missed. Whoever you sign with, ask for the clause before you ask for the rate.
Nearly every advance carries a personal guaranty, and the question is never whether one exists but what it guarantees.
A guaranty of performance — sometimes headed "guaranty of performance" or "validity guaranty" — is the owner's promise that the business will perform the agreement: not divert receipts to another account, not change processors or banks to defeat the debit, not block the ACH, not misrepresent the receivables, and not close or sell the business to escape the obligation. If the business simply does less business and the receivables are not generated, a performance guaranty is not triggered, because nothing was breached. This is the guaranty that is consistent with a sale, and it is the one a funder that genuinely bears revenue risk can justify.
A guaranty of payment makes the owner personally liable for the purchased amount whatever happens to the business. If the receivables are not generated, the owner pays anyway. That is recourse against the seller's assets rather than the seller's conduct, and it is difficult to square with the proposition that the funder assumed the risk of the receivables not arriving. It is also the third of the court's three factors seen from a different angle: a guaranty of payment survives the business's bankruptcy by design, which is very close to saying the funder has recourse if the merchant declares bankruptcy.[2][3]
The heading is not reliable. Some guaranties headed "performance" define a breach so broadly — any missed debit for any reason — that they operate as guaranties of payment. Read the definition of the breach, not the title. Personal guarantees: what you are actually signing covers the forms — unlimited, capped, joint and several — and what is negotiable.
What we do: most of our offers include a personal guaranty, which is standard for unsecured funding, and we show you the clause and what it covers before you sign. Ask which form it takes; the answer is in the document, not in the conversation.
Because Article 9 treats a buyer of accounts as a secured party,[1] most advance agreements contain a grant of a security interest and an authorisation to file a UCC-1 financing statement. The grant language usually reaches far beyond the receivables purchased: "all assets", "all personal property now owned or hereafter acquired", accounts, inventory, equipment, deposit accounts, general intangibles. That is a blanket lien, and its effect is not on this agreement but on the next one — a bank, an asset-based lender or a factor that needs a first-priority interest in the same collateral finds the advance funder ahead of it in the queue, and declines, subordinates at a price, or requires a payoff. The mechanics are in UCC-1 filings explained.
Three things to read in the clause.
The collateral description. Whether it names the purchased receivables or everything the business owns. A specific description is proportionate to a purchase of receivables; a blanket description secures a four-month advance with a five-year claim on assets the funder never paid for.
Whether filing is authorised, and when. Many agreements authorise a filing at signing. Some authorise it only on default. The difference is whether the notice exists on the public record while you are performing.
Termination. What the funder must do, and within how many days, once the purchased amount is delivered. The filing does not remove itself.
What we do: we file no UCC-1 lien against the businesses we fund. Our core working-capital products are unsecured, with no lien on business or personal assets. Equipment financing is the stated exception, because there the equipment itself secures the deal and a filing specific to it is the whole point of the lower price.
A confession of judgment is a pre-signed consent to a judgment against the business or its guarantor, allowing a creditor to enter one without a lawsuit and sometimes without notice — which removes the defences a lawsuit allows. In New York the mechanism is a defendant's affidavit stating the sum for which judgment may be entered and authorising its entry; the affidavit may be filed within three years of execution, after which the clerk enters judgment in the Supreme Court and it is enforced like any other.[5] No complaint, no service, no hearing, no opportunity to argue that the reconciliation clause was ignored or the debit was unauthorised.
For years the New York courts were the venue of choice for confessions against businesses that had never set foot in the state, because the statute did not require the debtor to reside there. It does now: the affidavit must state the New York county in which the defendant resided when it was executed, and it may be filed only with the clerk of that county or of the county where the defendant resides at filing — and for a business, residence means a county where it has a place of business.[5] An out-of-state merchant can no longer be confessed against in New York on the strength of a clause alone. That closed one door; it did not remove the clause from agreements written under other states' law, and it did not help anyone whose judgment was entered before the amendment.
The federal regulator's view is on the record. In its action against RCG Advances and its owner, the FTC alleged that the defendants required businesses and their owners to sign confessions of judgment that let them immediately obtain an uncontested judgment on an alleged default, and that they used those confessions to seize the owners' personal and business assets; the same complaint alleged the defendants' websites claimed no personal guaranty or collateral was required while their contracts required both. The result was a permanent ban from the merchant cash advance and debt collection industries and more than $2.7 million returned to the businesses.[6] The clause is not illegal in itself. It is the clause most associated with the conduct regulators have punished, which is reason enough to ask any funder whether it is in theirs.
What we do: our agreements contain no confession of judgment. If we ever have a dispute with a business we have funded, we will have to prove it like anyone else.
The events-of-default clause is where the contingency the first page promised is most often taken back, and it is the clause that is least read.
The legitimate events are breaches of conduct: diverting receipts to an undisclosed account, changing the bank account or processor without notice, blocking or reversing the ACH, misrepresenting the business's revenue, selling or closing the business. Those are the things a performance guaranty guards against, and there is nothing wrong with their being defaults.
The events to read closely are the ones that turn a decline in revenue into a breach. A clause that treats any returned debit as a default, with no carve-out for insufficient funds during a period the merchant has asked to reconcile, makes a slow month a default. A clause that treats the filing of a bankruptcy petition as an event of default, with the full purchased amount immediately due, is precisely the "recourse should the merchant declare bankruptcy" that the court's third factor looks for.[2][3] And a clause that accelerates the entire undelivered purchased amount on any default — rather than the receivables actually generated and not remitted — converts the contingent obligation into a fixed one at the moment it matters most.
Acceleration itself deserves a sentence. On a loan, acceleration makes the remaining principal due now. On a purchase of receivables, there is no principal, and an acceleration clause that demands the whole undelivered amount is asking for receivables that do not yet exist. Whether a court will read that as consistent with a sale is exactly the litigation the three-factor test exists to decide; from the merchant's side, the practical point is that acceleration plus a guaranty of payment plus a confession of judgment is the whole obligation, personally, without a hearing, on a single missed debit.
Read the default clause alongside the reconciliation clause and the guaranty. The three either agree that revenue risk sits with the funder, or they quietly disagree, and the disagreement always resolves against the merchant.
What we do: when a remittance stops fitting the business's cash flow, a structure adjustment is a normal conversation rather than a default, and the first thing to do when a debit is going to miss is call — the sequence is written out, and none of it involves silence.
On a loan, paying early saves the unearned interest. On a purchase, the purchased amount was fixed at signing, and unless the agreement says otherwise, delivering it in four months instead of nine saves nothing — the discount was the price of the money, not rent on it. That is the fixed-fee arithmetic set out in APR, factor rate and the math nobody shows you, and it is why a prepayment clause is worth reading rather than assuming.
A prepayment discount is a contractual reduction in the payback amount for early payoff. A real one is a schedule — at 30, 60, 90 or 120 days, this much of the remaining discount is waived — and it lives in the agreement, not in an email. Some agreements contain the reverse: a prepayment fee, or a requirement that early payoff be at the full purchased amount plus an administrative charge. California's disclosure law now requires a description of prepayment policies on the offer itself,[11] which is the right rule; in any state, ask the question in the form "if I deliver the balance in full at day 90, what do I owe in dollars?" and require the answer in writing.
The renewal clause is prepayment's twin, and it is where the unearned portion of the first discount is most often lost — a new advance pays off the old balance in full, at the full purchased amount, and the merchant pays a discount on money used to retire a discount. How funding renewals work has the arithmetic.
What we do: on our advance structures a portion of the remaining cost is typically waived if you pay off early, and if you renew after delivering 50% or more of the purchased amount, the remaining cost is waived entirely. Ask your funding specialist for the specific figure in writing before you sign.
Two clauses near the end govern who can transfer what. The merchant is generally barred from assigning the agreement or selling the business without consent, which is reasonable — the funder bought receivables from a specific business run by a specific owner. The funder, by contrast, usually reserves the right to assign the agreement freely: to a syndicate partner, to a servicer, to a buyer of the portfolio. That is also common and not by itself objectionable, but it has two practical consequences.
The first is that the party enforcing the agreement in a bad month may not be the party you negotiated with, and a servicer administering a portfolio has less reason to honour an informal understanding about reconciliation than the funder who wrote it. Get the reconciliation terms into the document for that reason alone.
The second is that a syndicated or participated advance may carry more than one interested party behind a single UCC-1, and a payoff or termination can require more than one signature. Ask, before signing, whether the advance will be participated out and who will service it.
What we do: we show you exactly what your offer involves before you sign, including who will service the account and whether any other party will hold an interest in it. Ask, and the answer goes in the document.
Two states now require the numbers this article has been reconstructing to be printed on the offer before it is signed, and the direction of travel elsewhere is toward the same rule.
New York. The Commercial Finance Disclosure Law, Article 8 of the Financial Services Law, requires a provider extending a specific offer of sales-based financing to disclose, in a format prescribed by the Department of Financial Services, the total amount of the financing and the disbursement amount after any fees deducted at disbursement, the finance charge, an estimated annual percentage rate calculated by the method in Regulation Z, and the estimated term and projected periodic payments based on a projection of the recipient's sales using either a historical method or an opt-in method.[7] The law reaches commercial financing offers of up to $2,500,000.[8] The Department adopted the implementing regulation, 23 NYCRR 600, in February 2023,[9] and the regime took effect that August.
California. Division 9.5 of the Financial Code, which begins at §22800, requires a provider to disclose at the time of a specific commercial financing offer, and to obtain the recipient's signature on the disclosure before consummating the transaction; a recipient for this purpose is a small business presented with an offer of $500,000 or less.[10] The Department of Financial Protection and Innovation's implementing rules require the total amount of funds provided, the total dollar cost of the financing, the term or estimated term, the method, frequency and amount of payments, and a description of prepayment policies.[11]
Neither statute changes what a court will call the agreement, and neither reaches the guaranty, the lien, the default clause or the confession of judgment. What they do is put the purchase price, the purchased amount, the estimated term and the annualised cost side by side on one page, which is most of the comparison a merchant needs and which the industry had not been volunteering. A funder that will produce a New York- or California-style disclosure for a business in Ohio is telling you something about how it drafts the rest of the document.
For scale: in the Federal Reserve's most recent Small Business Credit Survey, 38% of employer firms had applied for a loan, line of credit or merchant cash advance in the prior twelve months, and of those applicants 42% received the full amount they sought, 36% some or most of it, and 22% none.[12] There is no public dataset on what share of those advances carried a discretionary reconciliation clause, a blanket lien or a confession of judgment; the reported decisions and the FTC's docket are the only evidence in the record, and they are evidence of what goes wrong rather than of how often.
From the funder's side, here is what moves and what does not, in the order it is usually granted.
What is almost never negotiable is the purchased amount, once underwriting has set it. The price of an advance is a function of measured risk; the clauses are a function of drafting. Spend the negotiation on the clauses.
An honest account of the document has to include the cases where no drafting fixes the decision to sign it.
Where an advance is right — a timing gap with a visible far side, a time-boxed purchase whose margin clears the cost, a business a bank will not serve this quarter — the clauses in this article decide whether it stays right when the quarter turns out worse than planned.
A merchant cash advance agreement is a sale of receivables, and its enforceability as a sale turns on whether the funder genuinely bears the risk of a slow month. Courts read three things — a reconciliation right, a term that follows revenue rather than a calendar, and no recourse in bankruptcy — and two reported New York decisions on nearly identical first pages went opposite ways on the single word "may".[2][3] The purchase price, purchased amount and specified percentage set the price; the reconciliation clause, the guaranty, the security-interest grant, the events of default and any confession of judgment decide who actually carries the risk, and they can take back everything the first page promised without moving the factor rate. New York and California now force the price onto the offer; neither reaches the other clauses. Negotiate the clauses, not the purchased amount, in the order above.
For our part: no UCC-1 lien against the business, no confession of judgment, a structure adjustment as a normal conversation when the remittance stops fitting cash flow, and the total cost in dollars on every offer. We fund $5,000 to $10 million against monthly revenue of $10,000 or more, from three months in business, with a soft credit pull only, a decision within 24 business hours and funding within 24 hours of approval. To see what your own agreement would say before you see the rate, check what you would qualify for or call 518-312-0382.
The legal framework is stated from the primary texts cited: New York’s enactment of UCC §9-109, CPLR §3218 as amended, Article 8 of the Financial Services Law and the Department of Financial Services’ materials on it, Division 9.5 of the California Financial Code and the Department of Financial Protection and Innovation’s summary of its rules, and three reported New York appellate decisions. The three-factor test and the two agreements compared in the reported-agreements table are taken from the opinions themselves — purchase price, purchased amount and remittance mechanism as the courts recite them — and the implied factor and dollar cost are derived from those figures by division and subtraction. Holdings are summarised, not quoted, except where quotation marks appear.
The term-by-revenue figure applies the LG Funding agreement’s stated remittance terms (15% of revenue, capped at $2,499 a week, against a $129,267.20 purchased amount) across a range of monthly revenue and nothing else; the worked reconciliation example uses stated inputs of a $75,000 purchase price at a 1.28 factor, a 12% specified percentage, $90,000 of estimated monthly receipts and 21 banking days a month. Every published value in both is recomputed from those inputs by the site’s arithmetic audit before publication, and any input can be replaced with a reader’s own. The application and outcome figures are quoted from the Federal Reserve’s 2026 report on employer firms, a nationwide convenience sample of firms with fewer than 500 employees fielded in late 2025, and are offered as scale only.
The clause map, the ranking of what is negotiable and the description of the firm’s own agreements are Full Send Funding’s practice stated from the funder’s side. There is no public dataset on how often advance agreements carry discretionary reconciliation clauses, blanket liens or confessions of judgment; the article says so and does not estimate one.
The purchase price is what the funder pays today — the advance, before any fee deducted at disbursement. The purchased amount is the fixed dollar total of future receivables bought; dividing it by the purchase price gives the factor rate. The specified percentage is the share of receipts the funder has bought, and the expected term follows from it: purchased amount ÷ (specified percentage × expected receipts).
The contractual right to have a fixed remittance reduced when actual revenue falls short of the estimate it was sized against, usually on request and on production of statements. Read it for three things: whether the funder "shall" or "may" adjust, what evidence and response time it specifies, and whether a reconciled slow period counts as a default. In New York it is the first of three factors courts weigh when deciding whether an advance is a disguised loan.
By asking whether the sum advanced is repayable absolutely or contingently. New York courts weigh three factors: whether there is a reconciliation provision, whether the term is finite, and whether the funder has recourse if the merchant declares bankruptcy. An agreement with mandatory reconciliation and a term that follows sales was held to be a purchase; one with reconciliation at the funder’s sole discretion left a triable question of usury.
A guaranty of performance is the owner’s promise that the business will perform the agreement — not divert receipts, change banks or processors, block the debit, misrepresent revenue, or close to escape it. It is not triggered by the business simply doing less business. A guaranty of payment makes the owner personally liable for the purchased amount whatever happens, which is recourse against assets rather than conduct. Read the definition of breach, not the heading.
Because Article 9 of the Uniform Commercial Code applies to a sale of accounts as well as to security interests, so a buyer of receivables is a secured party and files to perfect what it bought. The question is reach: a description covering the purchased receivables is proportionate, while a blanket description of all assets secures a short advance with a five-year claim that can block the next facility. Full Send Funding files no UCC-1 against the business.
It is a pre-signed consent to a judgment without a lawsuit and sometimes without notice, so a dispute you could otherwise defend is a judgment already entered. New York now requires the affidavit to state a New York county where the defendant resides and to be filed there, which ended confessions against out-of-state businesses in New York courts. The FTC’s action against RCG Advances alleged confessions were used to seize owners’ assets. Full Send Funding’s agreements contain none.
Only if the agreement says so. The purchased amount is fixed at signing, so delivering it early saves nothing unless there is a prepayment discount — a written schedule of how much of the remaining cost is waived at stated points. Ask what you would owe in dollars at day 90 and require the answer in the document. On Full Send Funding advance structures a portion of the remaining cost is typically waived on early payoff.
New York’s Commercial Finance Disclosure Law requires, on offers up to $2,500,000, the financing amount and disbursement amount after fees, the finance charge, an estimated APR calculated by the Regulation Z method, and the estimated term and projected payments from a sales projection. California’s Division 9.5 requires, on offers of $500,000 or less, the total funds provided, total dollar cost, term, payment method and frequency, and prepayment policy, signed before the transaction closes.
Travis Yule founded Full Send Funding in 2021 and leads it from Middle Grove, New York. He writes about working capital from the underwriting side of the table — what the numbers actually have to say before a business gets funded.