Recharacterization
The legal argument that an MCA labeled as a receivables purchase is in substance a loan, and should be treated as one. If a court recharacterizes an advance, lending law applies, including usury caps that many MCA factor rates dramatically exceed.
Why it matters
Courts weigh whether repayment was truly contingent on revenue: real reconciliation, no fixed term, no absolute repayment obligation. Funders that ignored their own reconciliation clauses or collected fixed sums regardless of revenue hand merchants the argument. It is a lever in negotiation even when never litigated.
