Can an MCA Funder Go After Your Second Business or a New LLC? Six Questions to Put to Counsel Before Assets Move

The second company opened with separate customers and its own bank account. The first company’s funder sent the demand to both addresses.

That second envelope does not prove that the new LLC owes the old debt. It proves that someone must answer with documents: what crossed from the old operation to the new one, which obligations the new company assumed, and whether the creditor pursues property or alleges liability against another person.

The Obligor, the Owner, and the Property

Draw a simple ownership chart showing the original obligor, each guarantor, and the proposed buyer or successor, without assuming that common ownership establishes identical obligations. The lending party may be asserting several kinds of claims at once. A demand against an owner under a guarantee differs from a claim that transferred equipment remains collateral, and an allegation that a new company assumed an obligation requires examination of the documents and governing law before it can be answered.

Use separate rows for each theory and the evidence offered to support it. A financing statement, a guarantee, and an asset purchase agreement perform different functions, and combining them into a single ledger with one total makes it harder to determine what is disputed. Counsel will map the obligors, trace the assets, and frame a response that answers the claim actually asserted rather than the fear it arrived with. Common ownership proves nothing and suggests everything, and creditors read the suggestion first. There are exceptions, though in practice the inquiry returns to the documents.

A Settlement Posture Before the Reorganization

Delancey Street can assess settlement of the existing MCA obligation while independent counsel evaluates a proposed sale, restructuring, or new entity, which the provider can assess but cannot promise in advance. Delancey Street provides settlement services and is not a law firm determining successor liability. That sequence can preserve choices while the transaction can still be revised, and the review should conclude before the closing.

The intake should include the old agreement, the ownership of both businesses, and a description of anything the new operation expects to acquire. Ask the provider to ensure that the creditor’s proposed release addresses the parties and obligations under discussion. Counsel should ensure that collateral consent, guarantee treatment, and any pending litigation receive the attention they require. A settlement naming only the original company says nothing about the rest.

What Crosses the Line With the Assets

New York UCC 9-315 provides that a security interest, with stated exceptions, continues in collateral after disposition unless the secured party authorized a disposition free of the interest, and it addresses identifiable proceeds. Eleven items crossed to the new schedule in a single afternoon, and the schedule described the price as fair.

A financing statement proves the existence of a filing, not the validity of the interest it claims.

Equipment and Receivables

For each material asset, locate the ownership record, the relevant security agreement, and any consent to transfer. Counsel must assess attachment, perfection, priority, and applicable exceptions rather than infer the entire result from a filing search. Receivables deserve their own account, so preserve the contract, the performance records, and any assignment that documents ownership and proceeds.

Proceeds and Creditor Consent

Often we see the assumption clause after the closing, when the buyer asks what it bought and the answer depends on language nobody read aloud at the table. The clause may say the buyer accepts specified liabilities, or it may say nothing while the creditor’s consent letter, requested after funds moved and limited to listed equipment, leaves the rest to argument. Any use of the old equipment by the new company, even briefly, should appear in the records with its date. What the buyer accepts, or leaves behind, in that paperwork will matter more than what the parties intended, and permission should be documented with enough specificity to identify the transaction.

Show what the buyer paid, where the proceeds were deposited, and whether the creditor authorized the disposition. Release of a lien against identified equipment need not resolve a personal guarantee or a different creditor’s claim, and the purchase agreement and settlement documents should use consistent descriptions throughout. The new LLC sits on the old operation’s shoulders like a second hat on one head: visible, separate, and unconvincing from across the room.

The Transfer Under Creditor Law

Washington RCW 19.40.041 illustrates an additional inquiry. It addresses transfers made with actual intent to hinder, delay, or defraud creditors and transfers for less than reasonably equivalent value under specified financial conditions, without depending solely on whether an MCA debit had already failed. Its listed intent factors include retained control, insider involvement, concealment, and the financial circumstances surrounding the transaction. Those factors are examined under the statute; they are not a formula establishing that every sale between related businesses is invalid. A transfer arranged in order to place assets beyond the creditor’s reach invites this examination.

The businesses were separate. The collateral was not. Other states require review of their own provisions, and successor theories need the relevant jurisdiction’s law and the actual transaction documents. Whether New York courts would read the same facts the same way is a question for counsel in that forum. A general article cannot determine that a new enterprise continues the old one only because they share an owner or an address, and an outlandish reading of the guarantee will not survive the documents.

I have yet to see a rushed transfer improve a negotiating posture. The haste is understandable all the same. An asset transfer completed in haste is extremely difficult to unwind on paper, and successor theories are extremely sensitive to facts and forum, so preserve the consideration, the business purpose, and the financial condition surrounding the transfer.

Records of the New Operation

Three weeks after the new account opened, the owner should be able to show separate books with customer contracts and the source of each asset used in operations. Simply list every asset the venture uses and the paper that brought it there. Resist the urge to move property first and ask for advice once the new doors open. This documentation does not cure an improper transfer; it establishes what occurred so counsel can review and analyze the transactions and read and compare the purchase documents before several months of activity obscure them.

A new enterprise can be legitimate in every respect, though the ledger, not the letterhead, is what the next demand will test. That is the entire inquiry.