Category Archives: Recharacterization

New York Court Recharacterizes Merchant Agreement as Loan, Vacates Confessed Judgment and Voids Transaction

A business received financing from an alternative small business funder. The parties’ agreement stated that in exchange for the financing provided, the funder would receive 11.02% of the business’ daily receipts which the funder would take by debiting $331.82 from the … Continue reading

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Increased Value of Pledged Stock Not Interest

A lender provided a $600,000 loan to a borrower on the condition that the proceeds be used to purchase shares of a publicly traded company. The note provided for an interest rate of 10% and granted the lender warrants to … Continue reading

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In Three Separate Decisions, New York Courts Find Sale of Future Receivables Not Subject to Usury Laws

In three nearly identical cases, a small business funder entered into an agreement with three separate businesses to purchase a portion of the businesses’ future receivables for an upfront lump sum. In exchange for the lump sum payment, the funder was … Continue reading

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Bankruptcy Trustee Seeks to Recharacterize Litigation Financing Contract as Loan, Survives Motion to Dismiss

A litigation finance firm advanced funds to an attorney working a personal injury case on contingency. The attorney ultimately settled the case and was awarded a portion of the settlement as his fee. Following the settlement award, the attorney’s creditors, including the … Continue reading

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