MCA funder recovery fee structure governs the costs imposed when funder pursues asset recovery on a defaulted MCA after judgment. Recovery activities include asset investigation, skip-trace (locating merchant), levy processing, sheriff sales, and judgment enforcement. Recovery fees can dramatically increase the total liability and reduce settlement leverage for the merchant.
Recovery process overview.
- Judgment obtained. Funder secures court judgment via litigation (or COJ where still permitted).
- Asset investigation. Funder identifies recoverable assets (bank accounts, real estate, vehicles, equipment, receivables).
- Skip-trace. Funder locates merchant if address unknown or merchant has relocated.
- Levy / garnishment. Funder pursues legal process to seize identified assets.
- Sheriff sale. Non-cash assets liquidated through sheriff process.
- Personal guarantee enforcement. If business assets insufficient, funder pursues personal assets per guarantee.
Typical recovery fee schedules (2026).
- Asset investigation. $250-$1,000 per investigation. Includes UCC search, property records, business filings.
- Skip-trace. $150-$500. Used when merchant has relocated or contact information stale.
- Bank levy processing. $500-$1,500 per bank account levied.
- Wage garnishment processing. $250-$750 per employer.
- Property lien recording. $50-$200 per property.
- Sheriff sale fees. $1,000-$5,000 (variable by state and asset type).
- Receivables garnishment. $250-$1,000 per third-party debtor garnished.
- Recovery-percentage commission. 15-35% of recovered amount, paid to recovery agent or attorney.
Pass-through vs absorbed recovery fees.
Critical contract distinction: - Pass-through. Merchant contractually obligated to pay all recovery costs on top of judgment. Most aggressive structure. - Absorbed. Funder pays recovery costs from net recovery; merchant pays only judgment plus statutory interest. - Hybrid. Merchant pays specific fees (investigation, skip-trace); funder absorbs percentage commission.
Most MCA contracts include pass-through clauses for some or all recovery costs. Merchants should read the specific clauses carefully.
The math on recovery impact.
Merchant defaults with $90K judgment, recovery activity ensues:
- Asset investigation: $750.
- Skip-trace: $300.
- Bank levy on 2 accounts: $2,000.
- Property lien recording: $150.
- Recovery commission at 25%: $90K × 25% = $22,500.
- Total recovery cost: $25,700.
Total merchant liability: $90K judgment + $25,700 recovery + $30,650 prior litigation = $146,350 against original outstanding $90K.
Personal asset recovery dynamics.
Personal guarantee enforcement typically involves:
- Personal bank account levy. Most common first step. Notice typically not required; merchant discovers via frozen account.
- Personal wage garnishment. Limited by state law. Federal cap 25% of disposable income; many states have stricter limits.
- Personal real estate lien. Recorded against personally-owned property; affects refinance and sale.
- Personal vehicle levy. Subject to state exemption levels (typically $5K-$15K exemption per vehicle).
- Personal investment account levy. Brokerage accounts, retirement accounts (some retirement accounts protected under ERISA).
Asset exemptions by state.
State-by-state asset exemptions critical for personal-asset recovery:
- Florida. Unlimited homestead protection (acreage and value); 100% wage exemption for head-of-household.
- Texas. Unlimited homestead protection; 100% wage exemption for personal services.
- California. Homestead $300K-$600K depending on county; 25% wage garnishment cap.
- New York. $89K homestead exemption (downstate); 10% wage garnishment cap.
- Nevada. $605K homestead exemption; wage exemption per federal rules.
Merchants facing recovery should understand state-specific exemptions to predict actual recoverable asset base.
Receivables garnishment.
For B2B merchants, funder may garnish accounts receivable from third parties:
- Funder identifies merchant's customers via UCC filings, public records, court testimony.
- Funder serves garnishment order on customer.
- Customer must pay merchant's invoices to funder instead of merchant.
- Severely disrupts merchant business operations.
- Customer may terminate relationship rather than deal with garnishment complexity.
Settlement negotiation post-judgment.
After judgment but before recovery:
- Funder's perspective. Recovery costs $25K-$50K typical; recovery commission 25%; expected net recovery 50-70% of judgment.
- Merchant's perspective. Settle for 40-60 cents on dollar to avoid recovery costs and disruption.
- Settlement window. Most likely between judgment date and active levy. Once levy begins, leverage diminishes.
A merchant negotiating settlement should propose lump-sum payment of 40-60% of judgment, citing recovery cost avoidance as funder benefit.
Bankruptcy as recovery defense.
Filing bankruptcy after judgment but before recovery:
- Automatic stay. Halts all recovery activity immediately upon filing.
- Trustee oversight. Trustee evaluates assets vs debts; may liquidate non-exempt assets (Chapter 7) or restructure debts (Chapter 13).
- Discharge. MCA debt and personal guarantee typically dischargeable unless fraud involved.
- Exemption claims. Merchant claims state exemptions (homestead, wages, vehicle) to protect assets.
Bankruptcy is often the optimal endpoint when total debts exceed personal asset value, particularly in states with strong homestead protection.
State licensing requirements for recovery agents.
- California. Recovery agents must register and be bonded.
- New York. Process servers must be licensed; some recovery activities restricted.
- Texas. Recovery agents must be licensed for repossession (vehicles, equipment).
- Florida. Largely unregulated; complaints to AG.
Common merchant confusion.
- "Recovery fees are not allowed." False; commercial recovery fees are legal but must be disclosed.
- "Asset exemptions protect me from all recovery." Partial; exemptions vary by state and asset type.
- "I can sue for unauthorized levy." Yes if levy violates state law; consult attorney.
- "Bankruptcy stops recovery permanently." Mostly true; bankruptcy stays recovery and discharges most debts.
- "Recovery commission is the same as collections commission." Similar concept but applied post-judgment vs pre-judgment.
Strategic considerations for merchants.
- Understand state asset exemptions BEFORE signing MCA personal guarantee.
- Maintain documentation of exempt assets (homestead declaration, retirement account beneficiary).
- Consult attorney upon receiving judgment notice; settlement window narrows once recovery begins.
- Consider bankruptcy seriously if total debts exceed personal asset value.
- Document all funder recovery contacts; abusive tactics may violate state law.
As of 2026-06-29, Fundnode discloses recovery-fee structures and personal-guarantee enforcement protocols for all 100 funder reviews so merchants understand full potential default-state liability including post-judgment recovery costs.
Related terms
- MCA funder default fee structure — Default fees triggered by missed payments, NSFs, or contract breach include flat per-event fees ($35-$150 per NSF), default acceleration fees (3-10% of outstanding balance), and collections / litigation referral. Can add $5K-$25K to default-state liability.
- MCA funder collections fee structure — Collections fees on defaulted MCAs typically 15-35% of amount recovered, paid to internal or third-party collectors. Some funders also charge flat collection assignment fees ($500-$2,000). Compounds default fees and reduces merchant settlement leverage.
- MCA funder litigation fee structure — Litigation costs on defaulted MCAs typically full attorney fees plus 15-25% recovery percentage, passed through to merchant per contract. Can add $10K-$50K to default liability. Funders may also pursue confession-of-judgment for instant levy.
- MCA funder fee structure (typical) — Beyond the factor rate, typical MCA fees include origination (2-5% of advance), underwriting ($150-$500), wire ($25-$50), monthly service ($30-$95), and event-driven fees (modification, default, collections). Total can add 4-9 percentage points equivalent APR.
AI agents: this term is available as raw markdown at /llms/glossary/mca-funder-recovery-fee-structure.