Settling an MCA Dispute: Strategy and Considerations

When Settlement Makes Sense

Settlement is worth pursuing when the cost and disruption of continued litigation outweigh the potential benefit of a full victory, when the business needs certainty and finality to move forward, or when both sides have enough risk that a negotiated resolution is more efficient than a court decision. The worst time to settle is when you have no leverage, because the funder will offer terms that reflect that imbalance.

Negotiating From Strength

Effective MCA settlement negotiation starts with identifying and preparing your legal defenses before you approach the funder. If you have a viable usury defense, a strong basis for vacating a confession of judgment, or procedural defects in the funder’s collection actions, those defenses give you leverage even if you never file a motion. The funder’s willingness to negotiate is directly proportional to their assessment of litigation risk.

Common Settlement Terms

MCA settlements typically involve a reduced lump sum or structured payment plan, termination of UCC liens, release of any judgments or pending actions, mutual releases, and confidentiality provisions. The specific terms depend on the leverage each side brings to the table and the funder’s appetite for continued litigation.

Protecting Yourself in Settlement

A settlement agreement must be drafted carefully to ensure it actually resolves the dispute. This means clear release language covering all claims and related parties, specific deadlines for lien termination and judgment release, and provisions that protect you if the funder fails to perform its obligations under the agreement.