Beacon Client Solutions fights to support and protect small business owners by staying one step ahead of predatory Merchant Cash Advance (MCA) companies, their collections firms, and their attorneys. By collecting and mining massive amounts of data on the MCA industry, specifically how they go after small business owners legally, we 1) aim to inform the public on the behaviors of predatory MCA companies who are not regulated and 2) to use the data we collect and analyze to customize effective ways of addressing MCA issues that our clients need addressed. We are changing the industry through our cutting edge approach and work.
By Thomas Tramaglini, Chief Operations Officer
Knowledge is Power. Using Data to Drive Our Work Matters.
We have and continue to write extensively on the data we collect and use to drive our methods for helping small business owners. However, we also expose what we find to inform small business owners, as well as the industry. Collecting data and having an experienced team trained in data analysis allows us to stay ahead of others, as well as the MCA companies. Furthermore, we believe we are the only small business support who collects data and publishes MCA lawsuit trends nationwide.
MCA Lawsuits in New York Doubled from January to June 2023
It is pretty simple to see. In January 2023 in New York alone there were 500 lawsuits entered by MCA companies against small business owners. In June 2023 there were 1,106. This is more than double what was filed in January.
While there are many reasons for why the MCA companies file in the patterns that they do, however, clearly as the year goes on a trend is clear - More and more MCA companies are willing to sue small business owners.
***This chart contains all MCA lawsuits filed in New York by MCA companies from January to June of 2023. We estimate that over 90% of all MCA lawsuits are filed in New York.
What MCA Companies are the Most Litigious?
What MCA companies sue the most small business owners? From over 4,300 lawsuits from January to June 2023 which were filed in New York, the most litigious MCA predator was Arsenal Funding. CFG, Fenix Capital Funding, Advance Servicing Inc. and Vox Funding fill in the rest of the top 5 most litigious MCA companies.
So, if you have any issues with your Merchant Cash Advance(s) these companies are most likely to sue you and your business.
A Snapshot of MCA Lawsuits: January to June 2023
Below is a more descriptive look at the MCA lawsuit landscape. Not only do the number of lawsuits filed in New York consistently increase by month, so do the average amounts that the MCA predators are trying to recover.
In the table below (Lawsuit Amounts by Predatory MCA Company), we found that fundamental capital seemed to be the company trying to recover the most funds collectively but only ranking 10th in the number of lawsuits filed.
Lawsuit Amounts by Month: January to June 2023
Month | Number of Lawsuits | Total Amount MCA Sued For | Amount Sued Per Lawsuit |
January | 520 | $37,761,182 | $72,617.66 |
February | 415 | $30,408,257 | $73,272.91 |
March | 824 | $61,465,952 | $74,594.62 |
April | 589 | $43,588,438 | $74,004.14 |
May | 915 | $81,662,943 | $89,249.12 |
June | 1105 | $95,232,032 | $86,182.83 |
Total | 4368 | $350,118,804 | $80,155.40 |
Lawsuit Amounts by Predatory MCA Company: January to June 2023
MCA Predator | Amount Sued for In Lawsuits | Rank in Amount Sued For | Rank in Number of Lawsuits Filed |
Fundamental Capital | $16,108,812 | 1 | 10 |
Prosperum Capital LLC dba Arsenal Funding | $13,364,644 | 2 | 1 |
CFG Merchant Solutions | $10,736,058 | 3 | 2 |
Global Merchant Cash LLC | $6,753,126 | 4 | 16 |
Libertas Funding | $6,448,758 | 5 | 80 |
AJ Equity Group | $5,931,619 | 6 | 42 |
Cloudfund LLC | $5,607,789 | 7 | 39 |
Madison Advance | $5,545,033 | 8 | 89 |
Specialty Capital | $5,495,120 | 9 | 8 |
Bizfund | $5,452,409 | 10 | 7 |
Fenix Capital Funding | $5,446,616 | 11 | 3 |
Vox Funding LLC | $5,329,605 | 12 | 5 |
Westwood Funding Solutions | $4,886,986 | 13 | 42 |
DMKA dba The Smarter Merchant | $4,734,055 | 14 | 9 |
G and G Funding Group | $4,725,504 | 15 | 24 |
Itria Ventures | $4,557,314 | 16 | 11 |
Fundfi Merchant Funding | $4,544,651 | 17 | 12 |
Green Note Capital Partners | $4,276,103 | 18 | 27 |
Advance Servicing | $4,266,600 | 19 | 4 |
Silverline Services LLC | $3,999,582 | 20 | 6 |
What States Do Most MCA Businesses Come From Who Are Sued by MCA Companies?
Importantly, we track the states where small businesses come from who are sued by MCA companies. Such information is important to things we deal with such as UCC filings, judgements, and domestication (when judgements are brought to the state of the business owner from NY and other states where MCA lawsuits come from and used to collect funds and assets).
Nearly a quarter of all of the MCA lawsuits which were filed in New York over the past 6 months targeted companies located in Florida, Texas, California, and New York. Interestingly, Florida, New York, and California have all either been working on or have passed laws which are being implemented protect consumers from things such as hidden fees, and other attributes which are part of MCA agreements.
Furthermore, two other states that have recently implemented relatively strict disclosure laws (Utah and Virginia) have had relatively few lawsuits filed against businesses. For instance, Utah (26/0.71%) and Virginia (67/1.82%) do not match any out of control MCA civil action which was often highlighted by politicians in those states. Notwithstanding that those laws require things like fees and broker costs to be disclosed which are good, the data suggests that both states are not where MCA predators wreak the most havoc. The data suggests that states like Florida are nearly 7 times more likely to have a MCA lawsuit filed against the small business owner than in Virginia (in Utah a small business is 17 times less likely than in Florida to have a civil action placed on a small business or small business owner.
MCA Companies are Suing Small Businesses and Their Owners Faster.
In June 2023, MCA companies sued small business owners on average 5.4 days faster than they waited in January. Within the data we collected from January to June 2023, the following contributed to a faster default to lawsuit rate: 1) The MCA company, 2) the MCA attorney, and 3) the collections officers. Furthermore, companies who have their own legal teams (Itria Ventures, Fenix Financing) tend to sue the small business owner nearly 2 times faster than MCA companies who use collections companies or directly attempt to collect from the small business owner.
The take away is that when a small business owner looks for funding from an MCA company, sometimes the niche MCA companies can be easier to work with when faced with hardships than larger MCA companies with their own in-house legal team.
*4,370 lawsuits were included in the dataset
A Drop in the Bucket: We Have TONS of Date.
What we have highlighted in this brief article are just a small sample of data which we are using in our work for small business owners and their goals of protecting themselves against predatory MCA companies who consistently file civil actions against small businesses. Our data points to massive weaknesses in places where small business owners can fight Merchant Cash Advance companies as they defend themselves against their predatory behavior and civil actions.
Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Master’s and Doctorates in Organizational Leadership from Rutgers University, The State University of New Jersey.
Disclaimer: Beacon Client Solutions is not an accountancy, or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All our work is connected to those who are legally certified to give such advice. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico and Canada.
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