Merchant Cash Advances in Florida: Are They Valid and Enforceable?

Florida businesses seeking fast access to working capital often encounter merchant cash advances, commonly referred to as MCAs. Unlike a traditional business loan, an MCA is typically structured as the purchase of a merchant’s future receivables. That distinction is important because, under Florida law, whether a transaction is treated as a true sale of receivables or instead as a disguised loan can determine whether Florida’s usury laws apply.

A recent Florida appellate decision provides meaningful support for the enforceability of properly structured merchant cash advances. In the case discussed in the article you provided, Florida’s Third District Court of Appeal affirmed a ruling that the merchant cash advance agreement at issue was not a disguised loan and therefore was not subject to Florida’s criminal usury statute. Instead, the court treated the agreement as a valid purchase and sale of future receipts.

The court’s reasoning focused on a critical issue: whether repayment was absolute. In a traditional loan, the borrower must repay the money advanced regardless of business performance. In contrast, in the MCA at issue, the funder’s ability to collect was tied to the merchant’s actual revenue. That meant the funder assumed some degree of risk. The agreement also contained a reconciliation provision, which allowed the amounts collected to fluctuate based on the merchant’s business performance. Those features helped persuade the court that the transaction was not a loan at all.

The merchant argued that the arrangement still looked like a loan because it involved a credit check, a security interest, and a personal guaranty. But those facts, standing alone, did not carry the day. The court was persuaded by the structure of the agreement and by the fact that the funder did not have an unconditional right to repayment regardless of the merchant’s success. In other words, where the funder’s return depends on the merchant’s future receivables and the transaction places at least part of the investment at risk, Florida courts may view the arrangement as something other than a loan.

That does not mean every merchant cash advance will automatically be upheld. Courts may still look beyond the labels used in the contract and consider the practical realities of the transaction. If the agreement, collection practices, marketing materials, or course of dealing show that the merchant was really bound to repay the advance no matter what, a court could still conclude that the MCA was a disguised loan subject to attack under Florida law. The lesson is simple: substance matters more than labels.

For Florida business owners, merchant cash advances can offer quick funding, but they often come with significant costs and aggressive collection mechanisms. For MCA providers, this recent appellate guidance is helpful, but careful drafting and compliance remain essential. A well-structured agreement is important, but so are the company’s actual practices.

The bottom line: In Florida, a properly structured merchant cash advance may be enforceable and may fall outside the usury statute where repayment is contingent on future receivables and not absolute. But if the transaction functions like a loan in practice, it may still face serious legal challenge.