Merchant Cash Advance Lawsuit in Texas: What Business Owners Should Know

Getting a lawsuit notice - or a notice saying one is coming - is stressful, and the instinct to panic is understandable. But a merchant cash advance lawsuit in Texas isn't automatically the end of the road, and as of 2025, Texas business owners have real legal protections that didn't exist before.

How MCA Lawsuits Typically Happen

MCA lenders have historically leaned on a few aggressive tools when a business falls behind: confessions of judgment (a signed document letting the funder obtain a judgment without a hearing), UCC lien filings against business assets, and personal guarantee claims against the owner directly.

Some funders have also pursued judgments in other states - commonly New York - and then tried to enforce them against a Texas business. They also use arbitration to limit the business owners' defenses, which can make the process unfair to struggling businesses.

What Changed: Texas House Bill 700 (2025)

Effective September 1, 2025, Texas HB 700 regulates commercial sales-based financing - including merchant cash advances - for the first time. Two provisions matter most if you're facing collection or a lawsuit:

• Confessions of judgment are void. The law states that commercial sales-based financing contracts containing a confession of judgment provision "are deemed void and unenforceable" for Texas businesses.
• Disclosure and registration requirements. Providers and brokers offering these products to Texas businesses must register with the Texas Office of Consumer Credit Commissioner and provide upfront disclosures - total financing amount, finance charges, repayment terms, and collateral - before an application is finalized.

The law also limits when a funder can debit a business's bank account automatically, generally requiring a properly perfected, first-priority security interest to do so. Registration for existing providers is being phased in through the end of 2026, so this is still a developing area - another reason to get a specific legal read on your contract rather than assuming how it applies.

What a Personal Guarantee Does - and Doesn't - Mean Here

Many MCA personal guarantees are written more narrowly than business owners assume - sometimes limited to confirming the accuracy of information provided or compliance with the contract's terms, rather than an unconditional guarantee of the full amount. Whether that's true in your case depends entirely on how your specific guarantee is worded.

If You've Been Served, Generally:

• Don't ignore it. Ignoring a lawsuit can lead to a default judgment even where you'd otherwise have a defense.
• Get the contract and any judgment paperwork in front of an attorney. Specifically, ask them to check whether a confession of judgment was used and whether the guarantee is as broad as the funder is claiming.
• Understand that settlement is often still on the table even after a suit is filed. See MCA Debt Settlement.

Common Questions

Can an MCA Company Still Sue a Texas Business After HB 700?

Yes - HB 700 changes what tools a funder can use (confessions of judgment are now void, and disclosure/registration rules apply), but it doesn't prevent a funder from filing a standard breach-of-contract lawsuit.

What Is a Confession of Judgment?

It's a clause in some MCA contracts where the business pre-agrees to let the funder obtain a court judgment without a standard hearing. As of September 1, 2025, this type of provision is void and unenforceable in Texas commercial financing contracts.

Is a New York MCA Judgment Enforceable in Texas?

This depends on the specifics of how and where the judgment was obtained, and is squarely a question for an attorney - enforcement of out-of-state judgments involves its own separate legal process.

Merchant Cash Advance Resources

• Merchant Cash Advance Debt Help
• MCA Debt Settlement
• Can't Pay an MCA

Facing an MCA lawsuit in Texas?

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This is general information, not legal advice. Debt Redemption is not a law firm and does not give legal advice. Every contract and every lawsuit is different. If you've been served with a lawsuit, talk to a licensed Texas attorney about your specific situation as soon as possible. Debt Redemption works with Texas attorneys who may be able to assist.