What assets can an MCA company seize after default

When you default on an MCA, the first question every business owner asks is: what can they actually take? The honest answer is: more than you think, and faster than you’d expect.

Short answer: An MCA funder can go after your business bank accounts, your receivables, your merchant processing deposits, your equipment, your inventory, and in most cases, your personal assets too, because you signed a personal guarantee. In New York, they can get a restraining notice on your accounts within 24 hours of filing, sometimes less. They don’t need a judgment to freeze you. They just need a confession of judgment, or a fast-moving lawsuit, and the right judge.

Let’s go through what’s actually on the table.

Your business bank accounts

This is the first thing they go for, and it’s the easiest. When you signed the MCA agreement, you gave them authorization to ACH your account daily. The moment you default, they can, and will, continue hitting the account. But that’s the small move. The bigger move is the restraining notice. Once they file suit, or domesticate a confession of judgment, they can serve your bank directly, and freeze everything in the account. Not just the amount you owe. Everything. Payroll money, tax money, money you needed to pay vendors on Friday – all of it, frozen, until you fight it or settle.

And here’s the part most business owners don’t realize – they don’t have to guess which bank you use. Your bank statements were in the application. They know exactly where to serve.

Your receivables

The MCA isn’t technically a loan – it’s a purchase of future receivables. That’s the whole legal fiction the industry is built on. But the practical consequence is this: they filed a UCC-1 the day you funded, and that UCC gives them a security interest in your receivables. Every dollar your customers owe you, they have a claim on.

After default, they’ll send notices (these are sometimes called “notification of assignment” letters) to your customers, your credit card processor, and anyone else who pays you. The notices instruct your customers to send payment directly to the funder instead of you. Done aggressively, this can shut down your cash flow in 48 hours. You’re still running the business, still delivering the work, but the money goes somewhere else.

Your merchant processing

If you take credit cards, the funder will go directly to your processor. Some MCAs are structured as split-funding from the start, where the processor sends a percentage of every batch to the funder before it ever hits your account. In a default, they’ll often ratchet that percentage up, or they’ll file a UCC notice with the processor, and redirect the entire batch. Your processor, in most cases, will comply – they don’t want to be in the middle of a lawsuit, and their agreement with you almost always lets them freeze funds at their discretion.

Equipment, inventory, and “all assets”

Read your UCC-1 filing. Most of them don’t say “receivables only.” They say “all assets,” which is the industry default. That means your equipment, your inventory, your furniture, your vehicles titled to the business, your accounts receivable, your intellectual property – all of it is collateral, on paper.

In practice, funders don’t usually send a truck to take your forklift. It’s too expensive, too slow, and the resale value is low. But they can, and in certain industries (trucking, construction, restaurants with equipment) they will. More commonly, the “all assets” filing is leverage. They use it to block you from selling the business, from refinancing, from getting traditional credit, until you settle.

Your personal assets – this is the one that surprises people

Almost every MCA agreement has a personal guarantee. You signed it. Sometimes you didn’t read it. Doesn’t matter – you signed it. Once the funder has a judgment against you personally, they can go after:

• Your personal bank accounts
• Your brokerage accounts (yes, your stocks)
• Your home equity, in states where they can lien it
• Rental property you own in your name
• Your car, if it’s paid off, and titled to you
• Wages, in states that allow wage garnishment for commercial debt (not all do – New York is limited, Florida is friendly to debtors, Texas is even more so)

Retirement accounts (401k, IRA) are generally protected under federal law. Primary residence protection depends heavily on state homestead laws – Florida and Texas have strong homestead protection, New York is weaker, New Jersey is weaker still.

What they can’t take (usually)

• ERISA-protected retirement accounts
• Social Security income
• Disability payments
• In some states, a portion of home equity under homestead exemption
• Assets held in a spouse’s name only, if the spouse didn’t sign the guarantee (this gets litigated, but it’s usually the cleanest firewall)

This last point is why, if you’re heading toward default, titling decisions you made years ago matter more than anything you do in the final 30 days. Funders know this too, and if they can show you moved assets out of your name after the default, they’ll sue for fraudulent conveyance, and claw them back.

The 24-hour reality

Here’s what the timeline looks like, in the worst case. Monday, you default. Tuesday, the funder files a confession of judgment in New York (if they have one – and if you signed in the last few years before the 2019 law change, they might). Wednesday, they domesticate it in your home state, or they serve a restraining notice on your bank. Thursday, your account is frozen. Friday, payroll doesn’t run.

This isn’t a hypothetical. This is the standard playbook, and it happens every week.