What MCA companies do when you default: week-by-week timeline

If you’re reading this, you’re probably either already in default, or you’re about to be. Either way, you need to know what’s coming. Not the sanitized version. The real one.

Short answer: The first week is financial. The second week is psychological. By week three, they’re building a legal case. By week four, you’re getting served. And if you haven’t done anything by week six, your accounts are frozen, and you’re defending a lawsuit you’re probably going to lose.

Here’s how it actually unfolds.

Week 1: The ACH war

Day one of a missed payment doesn’t feel like anything. The debit bounces. Your bank charges you an NSF fee, usually $35. The funder gets hit with a returned payment fee, and they add that to your balance, usually $35 to $50 on their end.

Then they try again the next day.

Then again the day after.

Most funders will re-attempt two or three times within the first week, and each attempt is a fresh NSF on your end. By Friday, if you started defaulting on Monday, you’re already down $150 to $200 in bank fees alone, and another $100 to $150 tacked onto your MCA balance. And you haven’t talked to anyone yet.

Somewhere around day three or four, the calls start. It’s usually the funder’s in-house collections first – not a law firm, not an outside agency. These are the people who sit next to the underwriters who approved your deal. They know your business. They’ve seen your bank statements. They know when your big deposits hit.

The first call is almost always polite. “Hey, we noticed the ACH came back, what’s going on, let’s figure it out.” Don’t mistake this for patience. They’re feeling you out. They’re trying to figure out if you’re a temporary cash flow problem, or if you’re cooked. What you say on this call gets logged, and it gets used later.

Week 2: The pressure campaign

By week two, the tone changes.

If you haven’t paid, haven’t called back, or haven’t set up some kind of arrangement, you’ve been reclassified internally. You’re no longer a “slow pay.” You’re a “default.” And defaults get a different team, a different script, and a different escalation path.

This is when the volume picks up. Calls to your business line. Calls to your cell. Calls to the personal guarantor – which is usually you, but sometimes your spouse, or a partner, or whoever else signed. Calls at 8am. Calls at 7pm. Some funders will call 10, 15 times a day, from different numbers, because they know you’re screening.

Here’s the part most business owners don’t see coming: they have your bank statements. Which means they have the names of your customers, your vendors, and your payment processor. Some funders, particularly the aggressive ones, will start calling those people in week two. Not to collect from them – yet – but to create pressure. Your biggest customer gets a call from a “funding company” asking about their relationship with you. Now you have a business problem on top of a cash flow problem.

Some of these calls cross lines. Threats. Implications. References to your family, your home address, your kids’ school. None of it is legal. Most of it is never reported, because the business owner is embarrassed, scared, or doesn’t know they have recourse. Document everything. Screenshot every text. Save every voicemail. You’ll need them.

Week 3: The acceleration letter

Around day 15 to day 21, you get a letter. Sometimes it’s a PDF emailed to you. Sometimes it’s certified mail. Sometimes it’s both.

The letter does three things:

It declares you in default, formally, citing the specific section of your MCA agreement. It accelerates the entire balance – meaning the full purchased amount, minus what you’ve already paid, is now due immediately, in full, not on a daily payment schedule anymore. And it notifies you that fees, default interest, and attorney’s fees are being added to what you owe.

If your remaining balance was $80,000 on a daily schedule, the letter says you owe $80,000 today. Plus default fees, usually $2,500 to $5,000. Plus attorney’s fees, which get tacked on from the moment the file leaves the in-house team and hits an outside lawyer’s desk.

This letter matters for a reason most business owners miss: it’s the document that starts the legal clock. Everything after this point is being built for a courtroom.

Week 4: The UCC notices go out

Remember when you signed the MCA, and they filed a UCC-1 financing statement? That document has been sitting on file at the state level since day one, waiting.

At default, it gets activated.

The funder sends what’s called a “notice to account debtor” – basically a letter to anyone who owes you money – telling them that your receivables have been sold to the funder, and that payment should now be redirected. Your credit card processor gets one. Your big customers get one. Sometimes your landlord, if you sublease space. Sometimes vendors who owe you rebates.

Done right, this chokes off your incoming cash within 48 to 72 hours. You’ll see deposits that should be coming in, stop coming in. You’ll get calls from confused customers asking why they’re being told to pay someone else. Your processor might freeze your merchant account entirely, because they don’t want to be in the middle of a dispute about who owns the money.

This is the moment most business owners panic. It’s also the moment most of them make the wrong move – which is usually opening a new bank account at a new bank, and trying to route deposits there. Don’t. That’s a separate default under your agreement, it’s provable, and it’s the thing that turns a civil case into something a prosecutor can look at.

Week 5: The lawsuit gets filed

By week five, if nothing has been resolved, the file is with outside counsel, and the complaint is being drafted.

Most MCA lawsuits are filed in New York, regardless of where your business is located, because your MCA agreement has a forum selection clause that says disputes are litigated in New York. This is by design. New York state court is fast, plaintiff-friendly for commercial cases, and the MCA industry’s law firms know the judges, the clerks, and the procedures cold. You’re playing an away game.

The complaint names you, your business, and any personal guarantor. It attaches the MCA agreement, the bank statements showing the missed payments, and the acceleration letter. It asks for the accelerated balance, default fees, attorney’s fees, costs, and pre-judgment interest at 9% – which in New York, is the statutory rate.

You’ll get served. Either at your business, or at your home. Sometimes both. The process server will try to hand the papers to you personally. If they can’t, they’ll leave them with someone of suitable age at your address, and mail a copy. Either way, the clock starts ticking the day you’re served.

Week 6: The confession of judgment, or the restraining order

Here’s where it splits, depending on when you signed your agreement, and what state you’re in.

If your MCA agreement has a confession of judgment – most older ones do, most post-2019 ones don’t, because New York banned them for out-of-state defendants in commercial cases – the funder doesn’t even need to sue you in the traditional sense. They file the confession, which you signed at closing, and a judgment gets entered against you within days. No hearing. No notice. You find out when your bank account is frozen.

If there’s no confession of judgment, the funder files an order to show cause, asking the court for a temporary restraining order on your accounts. This is heard quickly, sometimes ex parte – meaning you’re not there, you don’t get to argue. If the judge grants it, your personal and business bank accounts are frozen within hours of the order being signed.

Either way, the outcome feels the same on your end: you wake up, try to pay a vendor, and the card declines. You call the bank, and they tell you there’s a legal hold. You call your lawyer – assuming you have one by now – and they tell you what just happened.

This is usually the moment the phone calls stop, because at this point, the funder doesn’t need to call you anymore. They have your money. Or, more accurately, they have access to it, and they’re about to take it.

What you should have done, and when

Week one is when you call. Not week four. Not after the acceleration letter. Week one, after the first NSF, before the second one. Most funders will work with you in week one in ways they will absolutely not work with you in week three, because in week one, you’re still a paying customer who had a bad week. In week three, you’re a file.

If you’re past week one, call anyway. The deal you can cut in week two is worse than the deal you could’ve cut in week one, but it’s better than the deal you can cut after you’ve been served.

If you’re past being served, you need a lawyer who does this specific work – not your cousin who does real estate closings, not the guy who wrote your operating agreement. Someone who knows MCA litigation, knows the funders, knows the judges, and knows what these cases actually settle for once they’re in the system.

And if you’ve got multiple MCAs stacked, and you’re defaulting on all of them at once, that’s a different conversation entirely, and it’s not one you should be having alone.