Is It Too Late to Settle After the Funder Sued Me?

No. You can settle your MCA lawsuit at any time before judgment, even after the case has been submitted to the jury for verdict.

When Can You Settle an MCA After a Lawsuit Is Filed?

In New York, CPLR 3217 lets the attorneys of record end a pending action by a stipulation of discontinuance, and after the case has been submitted to the court or jury, a stipulation signed by all of the parties who have appeared still does it. Pennsylvania is similar: Pa.R.C.P. 229 makes discontinuance the exclusive way a plaintiff may voluntarily end an action before trial.

Before each preliminary and compliance conference, the attorneys must consult about settlement and mediation under 22 NYCRR 202.11. The compliance conference, held at least sixty days before discovery closes, is partly there to explore settlement.

Once there is a judgment, the process is different; see our page on how to settle an MCA lawsuit that already has a judgment.

Will Negotiating My MCA Settlement Give Me More Time to Answer?

No. You generally must answer a summons and complaint within 20 days of being served, per CPLR 3012(a), unless the time is extended by court order under CPLR 2004 or by a signed stipulation. If you were served some other way than personal delivery, you may have 30 days to answer. Under CPLR 2104, an agreement in a pending action is not binding unless made in a signed writing or in open court. So if the funder’s attorney says not to worry about answering, get it in writing or answer on time.

What Do I Need to Include in My Settlement Stipulation?

The stipulation must end the lawsuit so you cannot be sued again. Under CPLR 3217(c), a discontinuance is without prejudice unless the stipulation otherwise provides. Include terms that:

• discontinue the action with prejudice against you and any guarantors;
• include a mutual general release without admitting liability;
• require a UCC-3 termination statement upon final payment (UCC 9-513(c) requires one within 20 days of an authenticated demand after payment);
• return or destroy any unfiled confession of judgment and withdraw notices to your customers or bank;
• give you written notice and a chance to cure before the funder can enter judgment; and
• limit any default judgment to the unpaid settlement balance, not the full claim.

This last point is very important. In Diesel Funding v Build Retail (2d Dept, April 29, 2026), the stipulation provided that on a default the funder could enter judgment “without any notice to the Defendants and without further application to the court” for the settlement amount plus 20% of the remaining balance. The Appellate Division enforced the judgment for $1,476,330.68. And while CPLR 5003-a requires a settling defendant to pay within 21 days, it does not apply to a structured settlement payable over time. So if you are paying over time, the default clause will be the only thing that protects you.

How Much Does It Cost to Wait to Settle My MCA Lawsuit?

On a $100,000 claim, waiting costs you an extra $750 a month, without even counting fees. Prejudgment interest on a contract claim runs from “the earliest ascertainable date the cause of action existed,” per CPLR 5001. For a commercial debt such as an MCA, the rate is 9% per annum under CPLR 5004; the lesser 2% rate only applies to consumer debt owed by an individual. A standard track case gets 12 months to complete discovery under 22 NYCRR 202.12, and a year of interest adds about $9,000.

Your MCA contract probably also makes you pay the funder’s collection costs and attorney’s fees. In NewCo Capital Group v SPE Trading (4th Dept, June 26, 2026), the Court affirmed judgment against the merchant and guarantor including attorney’s fees. Sample MCA contracts impose a $2,500 default fee plus 25% liquidated damages. Complaints usually include both in the balance due, but either one is something you can challenge.

Do I Have Any Defenses That Might Help Me Settle the Lawsuit for Less?

You may, if they’re strong enough to beat the funder’s motion for summary judgment. In New York, the test for whether an MCA is a loan (LG Funding, Second Dept, 2020) asks whether:

1. the merchant can genuinely reconcile the amount owed;
2. the financing has a finite term; and
3. the funder has recourse in the event of a bankruptcy filing.

If the arrangement is a loan and the interest rate exceeds 25% per year, you may be able to raise criminal usury, even if you’re a corporation. Such a loan is wholly void, so the funder might collect nothing at all (Adar Bays, Court of Appeals, 2021).

Ambiguity alone can defeat summary judgment, as in Kapitus v Suburban Waste (First Dept, February 26, 2026), where the Court denied the funder’s motion because “it is not clear whether reconciliation is mandatory or exercisable at plaintiff’s discretion.” Still, funders are often able to prove the advance was not a loan, as in Apollo Funding v Dave Reilly Construction (Second Dept, Sept. 24, 2025), where a $25,000 advance for $37,750 in receivables was held not to be a loan.

Frequently Asked Questions about Settling Merchant Cash Advance Lawsuits

The lawyer for the funder called me and said that they would agree to my settlement number. Are we settled?

Not until you have a signed writing. Under CPLR 2104, agreements in pending New York cases bind only if in a writing signed by the party or attorney, or made in open court. Until the stipulation is signed, keep defending the lawsuit and meeting your deadlines.

I settled the case against my company; am I out as a personal guarantor?

Make sure that the settlement agreement disposes of the action against you with prejudice and releases you personally.

I didn’t ask the funder to reconcile my account when I had the chance. Can I do it now?

It’s better to ask late than never to ask at all. In Diesel Funding (2026), the Court refused to consider whether reconciliation was illusory because the merchant had never attempted to use it. Ask for reconciliation in writing; it may help your defense and your leverage in settlement.

Can I make an offer of judgment?

Yes. Under CPLR 3221, you can serve the funder with a written offer of judgment up to 10 days before trial. If they refuse and don’t get a better result at trial, they lose their costs from the time of your offer and pay yours from then on. Costs are set by statute and don’t include attorney’s fees. If they accept, judgment is entered against you for the amount offered.