A COJ clause authorizes the funder to enter a judgment against you in court without filing a lawsuit, without notice, and without any opportunity to defend. The funder presents a completed affidavit to a court clerk (in states that permit COJ, primarily New York), and a judgment is entered within hours. The judgment can then be used to freeze bank accounts, garnish receivables, and place liens on property. COJ is the highest-impact contract term in MCA agreements because it eliminates the due process protections that normally precede a judgment.

A forum selection clause designating New York or Delaware as the required venue for any dispute means litigation occurs in a jurisdiction chosen for the funder’s convenience rather than yours. New York courts have extensive experience with MCA enforcement. New York COJ practice is well-established. A business owner in Georgia forced to respond to a New York lawsuit faces travel costs, the need for New York-admitted counsel, and a court unfamiliar with Georgia-specific defenses. Forum selection clauses are often enforceable; challenging them requires demonstrating that enforcement would be unreasonable or contrary to public policy, which is a high legal bar.

MCA agreements that authorize daily ACH debits without a clear revocation mechanism, or that define revocation as a breach triggering the full payoff amount, create a situation where any attempt to stop unauthorized debits is characterized as a default by the funder. The practical effect is that the business owner cannot stop the debits without triggering the very enforcement action they are trying to avoid. This provision is the basis for the ACH revocation legal analysis in Article 20 of this series: the right to revoke payment authorization exists under NACHA rules regardless of what the MCA agreement says, but exercising it requires understanding the enforcement mechanism the funder will use in response.

A UCC-1 financing statement filing that covers “all assets” or “all personal property” of the business creates a security interest in every asset the business owns, present and future. This lien can prevent the business from obtaining additional financing (because new lenders require first-priority position), selling assets, and in enforcement scenarios, can result in a secured creditor’s right to take possession of the entire asset base. The blanket lien is the standard MCA security instrument. Its quality depends entirely on whether it was filed correctly (Article 19 of this series covers defect identification and challenge).

A personal guarantee makes the business owner personally liable for the full claimed amount, not just the business entity. If the business closes, dissolves, or files bankruptcy, the personal guarantee survives as a direct obligation of the individual. The personal guarantee eliminates the corporate liability shield that would otherwise protect personal assets (home, personal accounts, personal property) from business debt enforcement. The scope of the guarantee matters: a guarantee limited to the principal balance is different from a guarantee covering the full factor amount plus fees and attorney costs.

Arbitration clauses that require disputes to be resolved through a specific arbitration provider selected by the funder, or that limit the arbitrator selection process in ways that favor the funder, create a dispute resolution system that is not neutral. Unlike court proceedings, arbitration is largely private, has limited appeal rights, and can be structured in ways that significantly disadvantage the respondent. An arbitration clause that waives class action rights also eliminates the coordinated collective action strategy that Article 30 identified as a solidarity network advantage.

MCA agreements that include reconciliation rights (the ability to request adjustment of the fixed daily payment based on actual receivables) are meaningfully different from those that eliminate or severely limit reconciliation. An MCA without reconciliation rights is, in practice, a fixed-payment obligation that does not vary with business performance, which is one of the factors courts consider in determining whether the agreement is a loan rather than a purchase of receivables. Limited or waived reconciliation rights are also one of the factors that support the argument that the MCA was structured to eliminate the characteristic that distinguishes it legally from usurious lending.