New York Appellate Division Reaffirms That Merchant Cash Advances Are Not Loans

A series of eight merchant cash advance agreeements were not loans, said the First Department of the New York Appellate Division.

In Strategic Funding Source, Inc. et al. v. Steenbok Inc. et al, the defendants filed for summary judgment to dismiss the complaint. The Court denied it and defendants appealed, causing the Appellate Division to determine whether or not eight merchant cash agreements between the parties were actually usurious loans.

Per the eight merchant agreements, repayment to plaintiff was contingent on future receivables existing. Accordingly, the cash advance was not a loan and is thus not a usurious transaction (see Champion Auto Sales, LLC v Pearl Beta Funding, LLC, 159 AD3d 507 [1st Dept 2018], lv denied 31 NY3d 910 [2018]).

It may have all been for naught because the parties actually settled the case two weeks prior to the decision, according to the public docket (See Index No: 2021-00877).