Back to SolutionsSubstance-Over-Form
Strategic Defense
When MCA contracts operate "in substance" as high-interest loans rather than true receivables purchases, legal analysis can reveal they are unenforceable or voidable under usury and contract law. By examining factor rates, fixed repayment obligations, UCC claims, and reconciliation, merchants can challenge the fundamental enforceability of the contract.
⚖NY Usury Thresholds
Civil Usury16% APR
Criminal Usury25% APR
Typical MCA APR100–400%+
Key Benefits
- Challenge enforceability by exposing MCA contracts that operate as illegal loans
- Apply substance-over-form analysis to reveal true loan characteristics
- Leverage NY usury law thresholds (16% civil, 25% criminal) in your defense
- Void or renegotiate contracts found to exceed legal interest limits
- Use LG 3-Prong test analysis to support reclassification arguments
- Build a complete forensic case for litigation or settlement leverage
Signs You Have a Defensible Contract
- Your effective APR is above 50%, or more likely 100-400%+
- The MCA has fixed daily payments regardless of your actual sales
- There is no genuine reconciliation mechanism in your contract
- Personal guarantees, confessions of judgment, or UCC-1 filings exist
- The contract was misrepresented as "not a loan" at the time of signing
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