LG 3-Prong Usury Test
Courts use this test to determine whether your Merchant Cash Advance is a disguised loan subject to usury law. Check the prongs that apply to your agreement.
A true MCA should adjust payments based on your actual daily sales. If your payments are fixed regardless of revenue, the agreement may function as a loan, not a purchase of future receivables.
A genuine MCA has no definite term. Repayment depends on future sales. A fixed repayment period or schedule suggests the agreement is structured as a loan.
If the funder can pursue your personal assets or has filed UCC liens, this suggests they expect absolute repayment. A hallmark of a loan, not a purchase.
Reclassification Probability
Chance of Reclassification
Based on your selections, your MCA appears to function as a legitimate purchase of future receivables. However, other factors may still apply.
Legal Disclaimer: This tool is for educational purposes only and does not constitute legal advice.