Jason Medley helps banks and other financial institutions structure transactions in a manner that enables them to be efficiently closed, allowing for key stakeholders to maximize benefits and avoid unnecessary delays or costs. He can be reached at jmedley@spencerfane.com and (713) 212-2691. claiming of ignorance by your customer. Additionally, I advise my clients to add the warning notice on their UCC1, warning potential secured parties like MCA’s that any junior lien would be a tortuous interference with our credit agreement. In my due diligence training classes, I always recommend that my clients re-run lien searches about every four to six months, which helps comply with the four-month rule regarding IRS liens and UCC Section 9-507(c) (2) (requiring that you amend your UCC1 within four months if the debtor’s name or jurisdiction changes).7 When doing this, you will get to see if any MCA has stacked its lien behind you. If you learn that your borrower has taken on an MCA, you should consider immediately re-notifying account debtors and putting both your borrower and the MCA on notice. Every source of working capital has its place, and MCAs are filling a void in the market. But having a nonpermitted junior lienholder extend credit to your borrower at a high annual yield and siphoning large amounts from their bank account threatens the economic viability of your borrower and threatens your dominion over the accounts receivable. For these reasons, banks should be mindful of the potential dangers of a borrower taking on a Merchant Cash Advance. ■ 1. Jorge Sun, Cash Advances: A Logical Next Step For Merchant Processors, Forbes (Mar 18, 2021). 2. Hester, B. and von Dwingelo, G.E. (2023) New York’s Detailed Commercial Finance Disclosure Requirements Take Effect. 3. Fleetwood Servs., LLC v. Ram Cap. Funding, LLC, 2022 WL 1997207 (S.D.N.Y. June 6, 2022). 4. International Factoring Association and the American Factoring Association Announce Change in Membership Guidelines, (2014a) Factoring [Preprint]. The International Factoring Association (IFA) and the American Factoring Association (AFA). 5. Bogucki, S.J. (2022) ‘MCA Transactions: True Sale or Disguised Loan?’, American Bankruptcy Institute Journal, 41(12); In re Shoot the Moon, LLC, 2020 WL 2621173 (Bankr. D. Mont. May 21, 2020). 6. Curtin, C. (2016) The Sad & Expensive Truth About Merchant Cash Advance (MCA) Loan Rates, LinkedIn. https://www.linkedin.com/pulse/sad-expensive-truthmerchant-cash-advance-mca-loan-rates-chris-curtin/ 7. U.C.C. § 9-507 (c)(2). The Show-Me Banker Magazine | 15
RkJQdWJsaXNoZXIy MTg3NDExNQ==