My MCA Funder Contacted My Customers. Can They Do That?
Imagine getting a call from one of your best customers saying they received a notice from a merchant cash advance (MCA) company telling them not to pay you.
For many business owners, this is the moment an MCA problem becomes something much bigger.
It's no longer just about making the payments. Now the dispute is potentially interfering with customer relationships, receivables, and the reputation of the business itself.
So can an MCA funder contact your customers?
Sometimes the agreement may give a funder rights involving receivables—but that doesn't mean every collection tactic is automatically proper.
Why Would an MCA Funder Contact Your Customers?
An MCA is commonly structured as the purchase of a percentage of a business's future receivables.
The agreement may also include provisions relating to purchased receivables, security interests, UCC filings, and collection rights following an alleged default.
When payments stop, some funders may attempt to enforce those provisions by contacting customers, payment processors, account debtors, or other third parties that owe money to the business.
From the funder's perspective, it may claim that those receivables are part of what it purchased or collateral securing the obligation.
From the business owner's perspective, the effect can be devastating.
The Business Consequences Can Be Serious
Consider a contractor that completes a $100,000 project for a longtime customer.
The customer is preparing to pay the invoice when it receives a notice from an MCA company claiming an interest in the payment.
Now the customer doesn't know whom to pay.
The contractor doesn't receive the $100,000 it needs for payroll and materials.
And a financing dispute that previously existed between the contractor and its MCA funder has suddenly involved one of the contractor's most important customers.
Even if the dispute is eventually resolved, the operational damage can be significant.
A UCC Filing Is Important—but It Isn't the Entire Analysis
Many MCA funders file UCC financing statements describing interests in business assets or receivables.
Business owners sometimes assume that the existence of a UCC filing automatically gives the funder unlimited authority to redirect payments from customers.
The reality can be considerably more complicated.
The MCA agreement, security agreement, UCC filing, nature of the receivable, applicable law, communications sent to the customer, and circumstances surrounding the alleged default can all matter.
This is why these situations need to be evaluated individually.
What Should You Do If a Customer Receives a Notice?
First, don't ignore it.
Ask the customer for a complete copy of whatever they received.
Then gather:
Your MCA agreement
Any security agreement
Relevant UCC filings
Communications from the funder
The invoice or receivable involved
Your payment history with the funder
You need to understand exactly what the funder is claiming before deciding how to respond.
You should also be thoughtful about communication with the customer. Your objective isn't merely to win an argument with the MCA company. It's to protect an important commercial relationship while the underlying dispute is addressed.
This Is One Reason Early Intervention Matters
Once MCA problems begin affecting customers, processors, or other third parties, the stakes become substantially higher.
Addressing unsustainable payments before collection activity reaches that stage can provide more room to develop an orderly resolution.
At Davenport Law, we've seen how quickly an MCA dispute can spread beyond the funder and merchant. Our approach considers not only the debt itself, but also the operational relationships the business needs to protect.
The Bottom Line
If an MCA funder contacts one of your customers or attempts to redirect your receivables, don't assume either that the funder can do whatever it wants or that the notice can safely be ignored.
Find out what the agreement actually says, what rights the funder is asserting, and what response best protects the business.
If an MCA dispute has begun affecting your customers, receivables, or business relationships, call Davenport Law at (214) 382-0105 or contact our team to discuss your situation.
This article provides general information and is not intended as legal advice. The rights and obligations involved in any MCA transaction depend on the applicable agreements, facts, and law.
