In most cases, once you accept the funding of a merchant cash advance, you cannot cancel the MCA. You may be able to pay off the merchant cash advance early, perhaps at a discount, or raise a defense if it is really a loan.
Can you cancel a merchant cash advance after you sign?
You almost never can, because “cooling off period” laws are limited to consumers. The Truth in Lending Act’s (“TILA”) three-business-day right of rescission applies only to consumer credit transactions secured by the consumer’s principal dwelling. 15 U.S.C. § 1635(a). TILA also excludes “extensions of credit primarily for business, commercial, or agricultural purposes” and credit extended to organizations. 15 U.S.C. § 1603(1). The FTC’s “Cooling-Off Rule” only applies to goods or services bought “primarily for personal, family, or household purposes.” 16 C.F.R. § 429.0. And MCA funders argue their product is not “credit” at all, but a purchase of future receivables.
State commercial financing laws, including those in New York, California, Florida, Connecticut, and Texas, focus on disclosure and do not allow for cancellation. Under Section 9(a) of Connecticut Public Act 23-201, a provider cannot revoke or modify a specific offer of commercial financing up to $250,000 until “midnight of the third calendar day after the date of the specific offer.” That gives you a few days to compare options before you sign.
If you have just been funded and want to return the money, check your agreement for a cancellation clause. If there is none, a return needs the funder’s consent. Common-law rescission for fraud or mutual mistake requires you to return what you received.
Can you get a discount if you pay off your MCA early?
Sometimes. The cost is usually fixed at the outset, and as Tayne Law Group notes, if you received a merchant cash advance of $100,000 at a factor rate of 1.3, you must pay $130,000 to pay it off.
Some MCAs do provide for an early payoff discount. Under Credibly’s “Early Remittance Discount”, if you pay the full outstanding balance in a lump sum with no “Events of Default” and a timely remittance history, it “can reduce the factor (cost) component of your Amount Sold by 20%.” The page seems to imply you get a 20% discount on the full factor. See table below.
Example of Early Payoff with 20% Discount on Factor
| Item | Amount |
|---|
| Amount funded | $50,000 |
| Factor rate | 1.40 |
| Purchased amount owed | $70,000 |
| Factor (cost) portion | $20,000 |
| Already remitted | $30,000 |
| Remaining balance | $40,000 |
| 20% off the factor portion | $4,000 |
| Lump-sum payoff | $36,000 |
The disclosure statement you signed should say whether paying early saves money. New York’s form must state either that you will still owe all or a portion of the finance charge, up to a stated dollar amount, if you pay faster than required, or that you will not owe any part of the finance charge other than unpaid accrued interest. 23 NYCRR § 600.6. New York providers must retain the disclosure for four years. Other states also require prepayment disclosure, including Connecticut, Florida (Fla. Stat. § 559.9613), and Texas. If you lost your copy, request one.
What happens if I stop making payments on my MCA or close my business checking account?
Most MCA agreements have an Event of Default if you stop paying by blocking ACH, opening a new bank account, or paying less. In LG Funding v. United Senior Properties of Olathe, 181 A.D.3d 664 (2d Dept 2020), the Event of Default provision made the full uncollected purchased amount, plus all fees, immediately due. In June 2026, the Fourth Department held that a merchant breached its agreement when it failed to request reconciliation within one (1) business day after a payment was returned for insufficient funds. A personal guaranty of performance makes you equally responsible. Closing your account won’t prevent collection because under UCC 9-607(a)(1), after default the MCA company can direct your customers or card processor to pay it directly, and under UCC 9-406(a), your customer and card processor can’t be discharged by paying you once they are notified.
In New York, interest accumulates at 9% per year from the date of judgment. A restraining notice can be served for twice the amount due to freeze your accounts. Texas H.B. 700 voids contracts that have a Confession of Judgment, effective September 1, 2025. In Pennsylvania, commercial Confessions of Judgment are still allowed, and you have thirty (30) days from service of notice to file a petition to open or strike the judgment under Pa.R.C.P. 2959(a)(3).
To revoke your ACH authorization, see How do I legally stop ACH withdrawals from an MCA. Before you stop payments, take these steps first: How do I stop MCA payments?
When can an MCA end without you cancelling it?
If the transaction is a true sale, then the MCA company bears the risk of your business failing. If you stop generating receivables without a triggering event like bankruptcy, the MCA company may not be able to collect the balance, though your agreement and guaranty decide that. If it is really a loan above 25% interest, the New York Court of Appeals held the criminally usurious loan void ab initio in Adar Bays v. GeneSYS ID, 37 N.Y.3d 320 (2021). That is typically a defense once you’ve been sued. An AG may also cancel debt in a settlement, as in AG James’ $1 billion settlement with Yellowstone Capital in January 2025.
What are the most common questions about canceling an MCA?
Can I cancel my MCA under the 3 Day Right of Rescission?
Unfortunately, no. TILA only allows rescission for consumer credit transactions secured by your principal dwelling, and the FTC Cooling-Off Rule only applies to purchases made for personal, family, or household purposes. Connecticut’s three (3) calendar day rule only stops providers from changing an offer before you sign.
How do I know if I can prepay my MCA and save money?
Look for a Prepayment section in the disclosure you got at signing (NY, CT, FL, TX and other states require one) and an Early Payoff or Early Remittance section in the agreement.
Is my MCA void if it’s really a loan?
Possibly, in New York, if a court re-characterizes it as a loan above 25% interest, because Adar Bays held criminally usurious loans void ab initio. It’s typically used as a defense once you’ve been sued, and affirmative usury actions are typically limited to one (1) year.
Is my MCA canceled as part of the Yellowstone Capital settlement?
On January 22, 2025, AG James announced a $1 billion settlement with Yellowstone Capital that canceled $534.5 million of MCA debt from over eighteen thousand (18,000) businesses.