Alternative lenders start off 2026 by filing a nearly 6,000 lawsuits against small business owners in New York.

Thomas Tramaglini
2 days ago
6 min read

# Have You Been Sued by an Alternative Lender?

## Understanding the MCA Lawsuit Process Matters

Do alternative lenders come after small business owners if they default? Absolutely. And recently, more and more litigation is being filed against those who cannot pay back their debt. That is, 2026 for alternative lending collection has started out with with more lawsuits than seen before. That is, alternative lenders filed nearly 6,000 lawsuits against small business owners in the first two months of 2026. This article gives an overview of the litigation and provides some implications for small business owners who are in collections or litigation.

By Thomas Tramaglini, Chief Operations Officer

Partner, The Center for Alternative Lending Research

thomas@beaconclientsolutions.com

About Thomas Tramaglini

2026 - A Banner Year to Be in Alternative Lending Collections.

During the first two months of 2026, alternative lenders filed nearly 6,000 lawsuits against small business owners in New York. This number is staggering considering the same period of 2025 saw only about 4,500 lawsuits filed against small business owners.

Who have been the most active filers of litigation against small business owners?

Creditor	Number of Lawsuits Filed
Bankers Healthcare Group	527
United Capital Experts	296
CFG Merchant Solutions	113
Lendr Online	96
The LCF Group, Inc.	84
Bizfund, LLC	78
Specialty Capital Group	69
Fast Business Cash	66
Flexibility Capital	63
Samson MCA	59

Why do we care about these data?

A high percent of small business owners who take on alternative loan and advance debt eventually are not able to make their payments resulting in a default. When these companies (and others) go after small business owners, it is imperative to understand their patterns, routines, and playbook.

What do these firms and other alternative lenders want?

Simply put, they want their money and they want it yesterday.

Why do alternative lenders like the ones listed above sue small business owners?

When small business owners default, they want to get paid back as fast as possible. Unlike loans, most alternative loans do not fall under laws which protect small business owners from certain collections procedures - so why do lenders sue you? Because it works.

Suing you can do the following:

Put you on notice that the lender is coming after your money or assets.
Once you have a judgment, they can collect via domestication in your state.
Recovery via your assets.
Lead to future wage garnishment.
And more.

Avoid Panicking and Making Impulsive Decisions

Being sued does not imply that you will be arrested or jailed for not paying. Brokers or lenders often use the threat of criminal charges to pressure clients into immediate payment. Remember, these are civil cases, not criminal ones. A significant series of events would need to occur before it becomes a criminal matter.

In some cases, brokers or lenders have threatened family members, clients, or the business owner with violence. If this occurs, contact the police right away.

The Reality of Seeking Help

Alternative lenders may discourage you from seeking help, claiming it won't lead to a better outcome. This is almost entirely untrue. When an MCA company sues you, it's crucial to understand that their side is solely focused on getting paid. The MCA company, their lawyer, and any collection agency involved are determined to recover their money through any legal means.

I've seen the full spectrum of the MCA collections industry. Many MCA companies, driven by their investors, use tactics like UCC freezes and judgments to collect debts. They pursue their interests relentlessly, regardless of the client.

Seeking help is not illegal. Having an attorney, such as one from our team, respond to your lawsuit can prevent immediate judgment and ensure professional representation.

Know Your Lawsuit Response Deadline

Typically, you have 30 days to respond to an MCA lawsuit. If you're in the state where it was filed, like New York, you have 20 days. Some states, like Virginia, allow only 21 days. It's crucial to respond within the given timeframe.

Ignoring the Lawsuit Is Not an Option

Pretending ignorance won't help and will only lead to a judgment against you. We often hear people say, "I wasn't served." Many small business owners waive their right to formal service when signing MCA agreements. It's vital to review each agreement for a clause about how you'll be notified of a lawsuit, often through regular mail, certified mail, or email. Ignoring this can result in a judgment against you.

Choose the Right Attorney

Your local attorney may not be able to assist you—you need an attorney in the state where you were sued. Clients often mention having an attorney, but it's crucial to hire one licensed in the relevant state. For example, if the lawsuit is in New York, you need an attorney admitted to practice there.

Our company provides experienced MCA law attorneys who can handle any situation effectively.

Responding to the Lawsuit

In most states, business owners are required to hire an attorney to respond to lawsuits. While there are affordable self-answering software solutions, caution is advised. Some states prohibit self-answering, and it often results in a judgment.

Be Wary of Additional Funding Offers

Brokers who initially funded you might offer more funding. Some brokers want to ensure they are paid on your MCA and may propose additional funding. However, if you're struggling with current debt, this only worsens your financial situation.

Avoid Judgments at All Costs

Avoid judgments at all costs. MCA companies file lawsuits in states favorable to their claims, like New York. In NY, if you fail to respond in time, a clerk from an attorney’s office can have the court clerk sign the judgment order without notice.

Moreover, MCA companies not only sue the business but also the small business owner personally.

What does this mean?

With a judgment, the MCA company can begin collections by freezing and seizing assets. Some MCA lenders can easily transfer the judgment (if from another state) to your state (domestication) and quickly start asset collection. This includes bank savings, assets like jewelry, non-primary real estate, and more. They can also require you to undergo discovery proceedings by collecting bank statements, tax returns, and other documents, preventing you from hiding assets.

In simpler terms, you DO NOT want a judgment.

Working with Debt Settlement Companies

If you're working with a debt settlement company and they claim to be handling the lawsuit, ensure they truly are. Several settlement companies have clients intentionally default on their obligations and more (see here).

Understanding UCC Liens

Protect Yourself by Understanding UCC. The Uniform Commercial Code (UCC) is a set of laws governing commercial transactions, recognized by all U.S. states. Lenders and Merchant Cash Advance companies use UCC filings to assert their rights to collateral or liens on loans or tangible assets.

Often, an MCA company has placed a UCC lien on a small business owner. If someone struggles to repay their MCA or stops payments, they can expect a UCC lien to be filed. This is a challenge many small business owners face, so if you're being sued, use our tool to check for a UCC filing against you and contact us for guidance.

Attempting to Negotiate the Debt by Yourself.

When an MCA company takes legal action against a small business owner, it is usually to either 1) satisfy the investors of the MCA company or 2) encourage clients to repay their MCAs.

Those who choose to engage directly with the MCA company can negotiate their settlement and assist themselves. However, the problem is that being sued puts them at a disadvantage compared to an MCA lender and attorney. If anything goes wrong before the repayment is finalized, the consequences can be much more severe in the long term.

It's advisable not to settle with an MCA company or their law firm on your own without first consulting or hiring an attorney.

Be Wary of Scams

If you are sued, be cautious of scams. Some debt settlement companies might reach out, promising you an 80% reduction in repayment or claiming they will penalize the MCA companies. Although we have witnessed savings reaching 80%, we never use this as a tactic to draw clients to our corporate portfolio. We believe that honesty, care, and transparency with clients are far more effective.

Recently, we published an article detailing some schemes used by debt settlement companies to help small business owners avoid scams. This article, titled "Scams that MCA Settlement Companies Use on Vulnerable Small Business Owners," has been downloaded thousands of times and is popular among our clients.

Contact Beacon Client Solutions to better understand your situation and how we can help you.

Dr. Thomas Tramaglini is the Director of Operations and Negotiation for Beacon Client Solutions, a company that supports small businesses on a host of fronts, especially MCA debt. Thomas has been a small business owner for many years, as well as held leadership positions in several organizations and companies. Thomas holds a B.A. in History, as well as Masters and Doctorates in Organizational Leadership from Rutgers, The State University of New Jersey.

Disclaimer: Beacon Client Solutions is not an accountancy or a law firm. We are business consultants. While Beacon works with outstanding attorneys and accountants, we cannot and do not provide legal or tax advice. All of our work is connected to those who are legally certified to give such advice. Beacon does have a longstanding body of work in MCA resolution and understands what small business owners deal with, specific to MCA. Beacon Client Solutions serves clients in all 50 states, Puerto Rico, Mexico, and Canada.