Ch. 7 Ruling Is Warning For Merchant Cash Advance Providers

Ch. 7 Ruling Is Warning For Merchant Cash Advance Providers

Court ruling recharacterizes MCA agreements as loans, exposing funders to multi-million-dollar preference liability.

July 18, 2025

United States
United States
United States
Law360

A recent bankruptcy court ruling in In re: JPR Mechanical Inc. delivers a major warning to MCA providers: labels won’t protect you if your agreement looks like a loan. The court ordered a provider to return over $3 million in payments after recharacterizing its contracts as disguised debt. This decision underscores the growing risk of preference exposure, especially when reconciliation terms are weak or procedural missteps occur. With courts increasingly focused on economic substance over form, MCA funders should take note.

Read the full analysis to see what this means for your contracts, litigation strategy, and compliance risk.

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