What does it mean when a merchant cash advance (MCA) funder issues a notice of default and acceleration? It means the funder says you have defaulted and must repay the entire purchased amount the funder hasn't yet collected, plus whatever fees, liquidated damages, attorney fees, and interest the contract permits. These can add 25% to 100% depending on the funder's template.
What does an MCA notice of default and acceleration actually say?
The funder is declaring that an Event of Default has occurred and that it is accelerating the remaining balance. That right is usually in the funder's discretion. Under Section 16 of Pawn Funding's Purchase Agreement filed with the Securities and Exchange Commission, "the full uncollected Receivables Purchased Amount plus all fees due under this Agreement may become due and payable in full immediately." The notice letter is how the funder exercises that discretion.
The notice will typically state which Event of Default occurred. Parkview Advance accelerates for two or more rejected ACH debits. Cobalt Funding accelerates after two consecutive or four total "non-sufficient funds" (NSF) ACH debits. All of the companies will accelerate if a business terminates the ACH authorization, changes banks or payment processors, or obtains another advance (see Five Mistakes that Double MCA Debt). Cobalt lists 22 Events of Default. Some MCA contracts accelerate when revenue declines or there has been a "material adverse change." Uniform Commercial Code Section 1-309, however, only permits acceleration for these reasons if the funder "believes in good faith that the prospect of payment or performance is impaired," and the business carries the burden of showing it did not.
Does the funder accelerate the full purchased amount or the remaining balance?
A funder can only accelerate the remaining balance, so payments the business has already delivered are deducted from the purchased amount. Parkview's model purchase agreement accelerates the undelivered Purchased Amount. In 2020, the New York Appellate Division, Second Department, read an LG Funding clause making the "full uncollected purchased amount" due the same way.
Which fees get added on top of the accelerated balance?
Each funder sets fees through its fee schedule and damages clause.
| What the funder charges | Parkview (Conn. law) | Pawn Funding (N.Y. law) | Cobalt (N.Y. law) |
|---|
| Default or liquidated damages | Greater of 25% of undelivered amount or $5,000 | 25% of unpaid balance | Greater of 40% of undelivered amount or $5,000 |
| Flat default or blocked account fee | $5,000 or 25% of outstanding amount | $2,500 | $2,500 |
| Each NSF return | $50 | $50 | $50 |
| Attorney fees | "Reasonable" fees and disbursements | Contingency of up to 40% | Contingency of up to 40% |
| Default interest | 9% per annum, calculated daily | 24% per annum (16% for sole props) | 16% per annum |
Pawn charges the business twice for collection costs: a 25% liquidated damages fee to cover the funder's "reasonable expenses" of recovering the unpaid balance, and then a separate contingency fee of up to 40%. Parkview can likewise charge a 25% default fee and a 25% blocked account fee if blocking the account was the Event of Default. See What Does Default Interest Mean on a Merchant Cash Advance?
How much can acceleration add to an $84,000 balance?
Assume a business received $100,000 at a factor rate of 1.40 ($140,000 total) and delivered $56,000. The remaining balance is $84,000. Depending on the template, a notice of acceleration will increase the balance to between $105,000 and $168,140:
- Parkview-style terms list $105,000 after the 25% default charge ($126,000 with the blocked account fee). Attorney fees are extra, and 9% interest adds about $787.50 per month.
- Pawn-style terms list $107,500 after the $2,500 fee and 25% default charge, then $150,500 with the 40% contingency fee. 24% interest on $107,500 is about $2,150 per month.
- Cobalt-style terms list $120,100 after the $2,500 fee and 40% default charge ("Reasonable Damages"), then $168,140 with the 40% contingency fee, double the real balance. 16% interest on $120,100 is about $1,601 per month.
In Oakshire Properties v Argus Capital Funding, the confession of judgment was for $319,993.20, and the plaintiff sought an additional $105,822.75 in fees and costs (33% on top).
Did the funder have to warn you or give you time to cure?
Probably not. None of the three sample contracts included a cure period, and Cobalt states it can take action "immediately and without notice." The letter was probably just for their records. Your contract may require notice and an opportunity to cure before accelerating, so check which state's law your agreement names (Parkview says Connecticut). If there is one, move quickly. In Oakshire, the funder took action two days after the owner asked for a payment reduction.
Will a court actually award the full accelerated amount?
Not automatically, since many of these amounts have not been tested in court. New York's statutory prejudgment interest rate is 9% per year under CPLR 5004, and contractual attorney's fees are generally only enforced if the fee is reasonable. An unopposed default judgment or confession of judgment will likely give the funder whatever it asks for. In New York, confessions of judgment are only permitted in the county where you live or do business under CPLR 3218, and they have been void in Texas since September 1, 2025 under House Bill 700. They are still valid for commercial transactions in Pennsylvania, but you can petition to strike or open the judgment under Pa.R.C.P. 2959.
Frequently Asked Questions
Is the attorney's fee on the notice letter accurate?
Probably not. It is likely just the percentage the contract allows. Both Pawn Funding and Cobalt's contracts allow a contingency fee of up to 40% before they've done much work, and New York courts generally don't enforce contractual attorney's fees unless the fee is reasonable.
Did the interest start accruing on the date of the notice letter?
It probably started when you first defaulted, likely before the letter's date. Cobalt charges 16% per year after default, Parkview charges 9% per year daily, and Pawn Funding charges 24% per year before and after judgment. On a $105,000 to $120,000 balance, that can be $800 to $2,150 per month.
Does acceleration still count if my MCA is really a loan?
The New York Appellate Division found in People v Richmond Capital Group (2026) that the MCAs in that case were loans subject to usury. Earlier, in Davis v Richmond Capital Group (2021), the court treated a clause accelerating the full balance if a couple of debits were rejected as a factor supporting the allegations that the MCAs are loans.
How do I calculate my actual balance so I can negotiate?
Start with the purchased amount minus the amount you have delivered. Then create a separate line for each charge the funder is imposing, with the contract section that allows it.