A merchant cash advance takes its cut every business day, good week or bad. When the debits outrun the revenue, you have more room to move than the funder's collection desk will ever tell you.
Texas HB 700 took effect on September 1, 2025. It added chapter 398 to the Finance Code, covering sales-based financing. For a covered deal the “this is a purchase” label no longer settles it, the charges count as interest, and confessions of judgment are void. What HB 700 changed, and what it does not give you →
The label on the contract is not the last word. Texas courts look at whether an advance is a true purchase of future receivables or a loan wearing a different name — and that single question decides which of your defenses are live.
For twenty years the argument was whether an advance was really a loan wearing a costume, and Texas law made that argument hard to win on purpose. Then the 89th Legislature passed House Bill 700, which added chapter 398 to the Texas Finance Code and put “sales-based financing” under rules of its own. If your deal is covered by chapter 398, the ground has moved under it.
Finance Code section 306.103 treated the parties' own characterisation of an account purchase transaction as conclusive, which is why the wording on page one usually ended the argument. Chapter 398 provides that sales-based financing entered into on or after September 1, 2025 does not qualify as an account purchase transaction under that section.
Under chapter 398 the fees and charges on a covered transaction are interest for usury purposes. That is the change with the most weight in it, because usury is something a borrower can actually raise.
For agreements covered by chapter 398, Texas voids confession-of-judgment provisions in sales-based financing outright rather than leaving it to be argued.
The law restricts automatic account debits where there is no properly perfected first-priority security interest in the account being debited.
A deal covered by chapter 398 is supposed to arrive with a commercial financing disclosure setting out the amount funded, the amount actually disbursed, the finance charge, the total repayment and the term.
Chapter 398 gives you no private right of action, and that matters less than it sounds. You cannot sue anyone under it. Enforcement belongs to the Texas Office of Consumer Credit Commissioner, the OCCC. Say that plainly, because plenty of people are being told otherwise by outfits that are not law firms.
What the statute does instead is change the ground the rest of your case is fought on. A covered deal is no longer an account purchase because it says so, and its charges are interest. The Legislature did not hand you a new lawsuit. It removed the defence that used to end the conversation.
It also tells you which way the wind is blowing. Texas looked at this industry, decided it needed rules, disclosures, and a ban on confessions of judgment, and gave the OCCC jurisdiction with civil penalties behind it. An OCCC complaint is a real step in the right case — a pressure point, not a way for you to recover anything.
Two limits on chapter 398, worth stating plainly. The date on your agreement decides which of these applies to you — older deals run through the traditional analysis further down this page. And the first page of your contract may take Texas out of it entirely: many funders write in the law of another state, Utah and Illinois are common, and neither caps commercial rates. Whether a Texas statute protecting a Texas merchant can be contracted away is a real argument, not a given. Anyone who tells you this law solves your case without having read your governing-law clause has not read your contract.
You applied for working capital one time. Maybe through a site that promised to match you with lenders, maybe from a cold call you took on a bad day.
That application did not go to one funder. It went to a broker — the industry calls them ISOs — and the broker sent it to everybody. That is the business model. Your bank statements, your revenue, your address and your cell number went out to a list, and within a day your phone started ringing from numbers you did not recognise, and it did not stop for weeks. Some of those callers were not brokers at all. They had simply bought the lead.
The broker is paid points on the funded amount, taken off the top, out of your money, on the day of funding. That is why the pressure to sign was so intense, and why the person who was calling you six times a day went quiet the moment the wire hit.
Then the deal was priced to be hard. Not impossible — hard. Because a merchant who is squeezed comes back. Somewhere around the point where you had paid off half, the calls started again, this time offering a renewal, and the renewal used a large part of the new advance to retire the old balance. Then a second funder, who had your file the whole time, called with an add-on. Then a third.
Nobody sat down and decided to take five advances. The stack is what the distribution model produces. If that is roughly your story, you are not an outlier and you did not do anything unusual. You went through the standard sequence.
We have had this conversation many times and it opens the same way almost every time. Someone calls it the worst decision they ever made. A husband and wife get on the line together because of which one of them signed, and you can hear that it has been discussed more than once. Almost everybody apologises at some point, usually for something that was never theirs to apologise for. And nearly all of it starts with the same sentence, said quietly: we do not want to lose the business.
None of the apologising is necessary here. You are describing a product that was built to end up roughly where you are, and we have read this paperwork before.
This is not one industry's problem. An application that gets sold to a list does not care what you do. Roofers, clinics, gyms, restaurants, gas stations, agencies, truckers — the same sequence lands on all of them and the paperwork is close to identical every time. If you are reading this thinking you made a uniquely bad decision, you did not. You got the same deal everybody else got. Anonymised below, and deliberately without amounts or outcomes; the posture is the point.
The fight was the receivables, not the debt. Where the receivable is a claim under an insurance policy for care provided, the mechanism a funder relies on to redirect payment may not reach it at all.
A UCC filing in Texas, a suit filed in a New York court, and letters to the people who owed the company money. The customer letters were the emergency; everything else could wait a week.
Two obligations on completely different tracks, one of which the owners could not afford to let default while they dealt with the other. The order of operations was the whole question.
The payment did not move when the memberships did. The reconciliation right existed on paper and had never once been honoured.
Each was taken to cover the last. Every agreement in the chain had to be read before any payoff figure could be trusted.
Filed where the contract said rather than where the business was. The first job was the answer date, not the negotiation.
The financing statement had been filed at funding, not at default, which is why the equipment lease fell through long before anyone called a lawyer.
Illustrative summaries of matters this firm has handled, with identifying details removed. Prior results do not guarantee or predict a similar outcome in any other matter.
Once we appear, the funder's collectors deal with this office. You get to run the business instead of fielding calls about it.
Reconciliation clause, security interest, guarantee, choice of law, arbitration. What a funder can actually enforce is usually narrower than what it claims.
A default judgment is the funder's cheapest outcome and the hardest thing to undo. Missing the answer date is the single most expensive mistake in these cases.
There is no single answer to an advance you cannot pay. Some contracts are worth attacking, some funders are worth negotiating with, and some balance sheets need a reorganisation. The route depends on your paperwork and your numbers, not on a script.
You are not going to read anything here you have not already lived. That is the point of writing it down. If your week looks like this list, nothing has gone unusually wrong with you and you are not behind on something everybody else understood — this is simply what these agreements do, in roughly the order they do it.
The agreement is written so that the payment comes out daily or weekly whether or not you had the revenue to support it. A failed debit is often re-presented, sometimes more than once, and each one is another overdraft item. The first real damage in most of these files is done by your own bank's fees, not by the funder.
In most of these contracts, default is not missing a payment. It is a rejected debit, or changing your bank account, or taking another advance, or a fall in your balance. People are stunned to learn they were in default weeks before they knew there was a problem.
The right to have the payment adjusted when revenue falls is the feature that makes the deal look like a purchase instead of a loan. When a merchant invokes it and it is ignored, that failure matters twice — as a breach, and as evidence about what the arrangement really was. Send the request in writing and keep the copy. If you asked by phone, write down when and to whom.
They go to your cell, your office, your accountant, and the number your spouse listed on something years ago. They come from different area codes and different names, because the file may be with a servicer or a collection firm rather than the funder you signed with.
Most of these agreements take a blanket security interest in essentially every asset of the business, and the UCC-1 was filed at funding — not when you defaulted. It is a public record. It is why your bank got strange, why the equipment lease fell through, and why nobody serious will lend to you. Whether a given filing is supported by an enforceable interest is a separate question from whether it exists.
A funder claiming an interest in your receivables may write to the people who pay you and direct them to pay the funder instead. It works because your customer is not going to litigate — they will simply hold the money to be safe. This is the fastest way an operating business dies, and it is the one to call about the same day it happens. It is also the tactic with the most law on it, and much of that law is not on the funder's side.
Priced for a business already in trouble, and structured so much of the new advance retires the old balance. Which brings us to the number almost nobody checks.
Filed where the contract says, sometimes with a judgment obtained elsewhere and then brought to Texas to be enforced. A judgment from another state still has to be domesticated here, and that process has requirements.
On a renewal, look at the disbursement page — not the first page. Find the line where part of the new advance was used to pay off the prior balance. Subtract it.
This office has seen a renewal papered as seventy thousand dollars where roughly forty-six thousand of it went straight back to the same funder to retire its own earlier deal, and about twenty-one thousand in new money actually reached the business. On the face of the contract that deal looks unremarkable. Measured against what was really advanced, it looks like something else entirely, and which of those two numbers is the correct denominator is a genuine legal question with a large amount riding on it.
If you have been renewed even once, the earlier agreement is not old paperwork. It is part of the current claim, and you should not sign anything or agree to any payoff figure before someone has read the whole chain.
Described throughout as industry practice. None of it is attributed to any particular company, and your own file may look different.
Most merchants do not hear this from the funder. They hear it from a customer who calls up confused, holding a letter, asking what they are supposed to do now — and the honest answer in that moment is usually that the owner has no idea either, followed by an afternoon spent calling customers one at a time trying to explain something you do not fully understand yet, to people whose opinion of you is the thing your business runs on. A funder claiming a security interest in your receivables may write to the people who pay you and tell them the money has been assigned and to pay the funder instead. Most merchants assume that is simply how it works and that their customer has to comply. That is not how it works. The Business and Commerce Code sets out what such a notice has to do to have any effect at all, and these letters routinely miss.
If a notice has gone out to a payor, that is a same-day problem. Every week it sits is revenue that does not arrive, and the customer relationship is usually harder to repair than the receivable. Whether any of the above defeats a particular notice depends entirely on the letter and the facts.
Nearly every one of these agreements takes a security interest in substantially everything the business owns — receivables, equipment, inventory, deposit accounts, general intangibles — and the financing statement was filed with the Secretary of State at funding, not when you fell behind. It is public. Anyone who runs your company sees it.
That filing is why the bank tightened up, why the equipment lease fell apart, and why conventional financing has become impossible. Where several funders have filed, there is also a priority question among them that has real consequences for what any one of them can actually do.
Two things are worth knowing. A filing is not proof of an enforceable interest — it is a public notice, and what stands behind it is a separate question. And filings do not expire quietly when a deal ends. There is a procedure for getting a satisfied financing statement released, and it needs to be part of any settlement rather than an afterthought, or you settle the debt and keep the lien.
Funders, servicers and collection firms this office has dealt with or appeared against include:
If your funder is on this list we have read its paper, we know how its file behaves and we know who answers the phone on the other side. If it is not, that changes nothing about your case — there are hundreds of these companies and new ones every month.
Bring the agreement and three months of statements. We tell you what the contract actually says and what the realistic routes are.
Reconciliation terms, security interests, guarantees, choice of law, and what the effective cost of the money really was.
If there is a suit, an answer gets filed. Nothing else matters until the default risk is off the table.
Demand, negotiation, or litigation — whichever the paperwork and the numbers support. Often it is negotiation with a filed answer behind it.
A restructured payoff, a defended dismissal or settlement, or a confirmed reorganisation plan. Which one depends on the file.
For a deal made before September 2025 — and for any deal where the contract puts another state's law in charge — this is still the whole fight, and it is won on how the deal actually operated rather than on what it was called. Was repayment genuinely contingent on revenue. Was the reconciliation right real or decorative. Did the funder ever bear an actual risk of loss.
Read the deal as it was performed — the contract on paper and the debits in the bank record often tell different stories.
Test reconciliation. A genuine right to adjust with revenue is the strongest thing a funder has; an ignored one is the weakest.
Price the money. Converting the fee to an effective annual cost is where these deals tend to look least like sales.
Choose the forum. Some of these arguments do their real work in settlement rather than at trial — but only once they are credible.
Look for the disclosure box. A covered post-September-2025 deal is supposed to come with a written commercial financing disclosure showing the amount funded, the amount actually disbursed, the finance charge, the total repayment and the term. If your agreement has one, it contains every number needed to price the deal — supplied by the funder. If it does not have one, that is worth a conversation on its own.
The contract, the fight, and the reorganisation route.
One more reason not to wait: some of the claims available to you cannot be filed the day you decide to fight. Texas requires advance written notice before certain usury penalties can be sued on, and that clock does not start until somebody sends the letter. Coming in early is not just about the answer deadline — it is about starting clocks that only run once they are started. Bring us the contract and three months of bank statements. We will tell you what the agreement actually says, what is defensible and what it will take. The consultation is free.
Not legal advice. Prefer a person? Call (469) 607-8552