Can an MCA Funder Repossess Inventory or Show Up at Your Business?

The person at the door and the right to the inventory are separate questions. A visit to the business establishes neither a security interest nor a license to remove a single shelf.

Before the owner discusses property, before anyone touches a box, the task is identification: the person, the property claimed, and the legal basis asserted.

The Claimed Role

Ask who is present and whom that person represents. The visitor was, if the card can be believed, a process server. Preserve the documents offered, and distinguish a private collection representative from an enforcement officer acting under actual process. The demand was for everything.

Payment demands, inspection requests, and demands for possession backed by unseen papers require different responses. You open the door and the debt is standing in your shop. Counsel needs the stated purpose and supporting papers rather than a general account of the visit. A visitor may press for immediate answers in order to prevent that review.

Keep the interaction factual. The owner should create no physical confrontation, and no argument at the door can resolve the underlying security dispute (memory blurs faster than owners expect). The visit was lawful. The removal would not have been.

If an execution or order is presented, identify the court and the case. The business should obtain legal assistance on the actual document and the authority of the officer. Record what property the person identifies.

Whether the Inventory Is Collateral

Retrieve the security agreement and compare its description with the goods involved. Inspect and inventory the goods before conceding that any item is covered. Identify the entity that granted the interest and the event asserted as default.

But a financing statement is not the security agreement. A filing alone should not be treated as proof that every item at the premises belongs to the debtor or is covered by an enforceable grant. The phrase all assets in the description deserves the same skeptical reading as any other boilerplate.

Separate customer property, leased items, and goods under other arrangements, since their presence establishes neither the ownership of the debtor nor the entitlement of the claimant (and the description language varies beyond what the forms suggest). Do not assume that describing goods as consigned resolves every rights question.

A blanket lien claim over the whole shop works like a fishing net thrown over a parking lot: wide, confident, and catching mostly asphalt. Before agreeing to surrender inventory, before presenting it as a settlement asset, establish the rights involved.

Limits on Nonjudicial Possession

New York UCC Section 9-609 permits a secured party to take possession of collateral after default. Only after default does the statute permit action without judicial process, and then only without breach of the peace. This is a rule concerning the collateral of the secured party. It does not authorize a private claimant to take unrelated goods over a missed MCA payment. That is the line the statute draws.

Possession, in short, follows the paper or the peace, and nothing else. Even where a security interest exists, the manner of obtaining possession requires review. The owner should preserve the facts of the encounter and obtain an assessment from counsel rather than assume the contract permits every proposed action.

The Method Matters as Much as the Right

The statute also addresses rendering equipment unusable without removal and assembly of collateral where agreed. Those provisions reflect an uncommon patience with the practical problems of heavy goods. They do not let any funder lock the premises or control every register. I have yet to see a padlock survive a serious challenge to the paper behind it.

Ask counsel to review and analyze the actual demand, since both the right asserted and the procedure used matter. A court judgment with an execution involves officers and court papers, a different route from contractual repossession. Whether that knock counts as peaceable is a question for the court that hears how loud it was.

Resist the urge to resolve uncertainty by hiding or relocating goods without advice. An extremely useful initial review establishes what has occurred and what remains a threat. Keep purchase and ownership records intact.

Sale and Proceeds

New York UCC 9-315 addresses interests continuing in collateral and identifiable proceeds, subject to authorization and exceptions. Selling inventory should not be assumed to eliminate the rights attached to it.

Ask counsel to identify any other claims and required consents, since supplier and lender interests may require separate analysis rather than an assumed priority based on names. Before any offer is signed, the proposed disposition should be compared with the cost of completing customer orders.

Keep the sale terms and release documents together, and where the proposed inventory value is an estimate, identify its basis. An accounting total, an expected retail price, and an actual purchase offer from a buyer with funds available can describe different amounts.

Ask whether the proposed agreement resolves only possession or also the balance. A creditor may accept property while leaving a deficiency claim against the owner unresolved. Whether the offer covers the balance depends on arithmetic this article cannot perform.

The Visit Record

Preserve the facts of the encounter while they are fresh, recording dates, names, and the documents shown with the words used. The file should reflect what happened, not what the demand implied. Photographs of the premises taken that day can fix what a later affidavit disputes.

Owners want the confrontation finished. Speed is the enemy of precision in this setting.

Settlement Posture With Goods on the Shelves

The inventory can stay on the shelves while the MCA balance is addressed, and a settlement assessment with Delancey Street tests whether the numbers allow it. Delancey Street is a settlement company, not a law firm, and independent counsel handles the claims against the goods and the questions the visit raised.

Ask the adviser to ensure any proposed surrender is valued before it is offered. Counsel should ensure the credit for surrendered goods is stated in the agreement. The attorney reviews the security documents, values the collateral, and shapes an offer that the remaining inventory can support.

Most visitors know they cannot take the goods by force, and describe the goods as already theirs. An extremely confident manner proves nothing about the paper behind it. Remarks to the visitor about ownership, even casually, become part of the record.

Simply keep the doors open and the records current while the inventory sits on the shelves like books in a library that has lost its catalog. What the owner offers, or refuses to offer, at the doorstep shapes the negotiation. One need not surrender goods to prove good faith while counsel works, though no article stops a determined creditor from filing. We keep the goods and the negotiation on separate shelves.