If a merchant cash advance company is about to freeze your business account — or already has — this post explains exactly how they do it, and in the order they usually do it. There are 8 mechanisms. We see all of them, every week.
Short Answer
MCA funders freeze business bank accounts using a mix of legal tools and operational tools. The legal tools are confessions of judgment, pre-judgment attachment orders, post-judgment restraining notices, and information subpoenas. The operational tools are draining the ACH, sending UCC notices to your customers, hijacking your merchant processor, and going after the personal guarantor’s accounts. Most of these hit within 24 to 72 hours of a default. No warning. No court appearance. By the time you find out, the money is already gone, or locked up, or being redirected.
If you’re in the middle of this right now, or you can see it coming – keep reading. Speed matters more than almost anything else at this stage.
1. Confession of Judgment (COJ)
The single fastest way an MCA company can freeze your account. A confession of judgment is a document you signed at funding, where you agreed – in advance – that if you default, the lender can walk into court, file the COJ, and get a judgment against you without notifying you, without a hearing, and without you being able to defend yourself.
Once they have the judgment, they immediately send a restraining notice to your bank. The bank freezes your account the same day they receive it.
A few things to know:
- New York banned COJs against out-of-state debtors in 2019. But many older agreements still have them, and lenders still use them in other states.
- If your MCA was funded before 2019 and you signed in NY, the COJ is probably still on file.
- Some funders moved their COJ filings to other state courts (Pennsylvania was popular for a while) to keep the practice alive.
If a COJ exists in your file, the freeze can be in motion before you’ve even returned a missed call from the funder. This is by design.
2. Pre-Judgment TRO and Attachment Order
This is what they use when there’s no COJ. The funder files a lawsuit, and on the same day – or within 48 hours – they file a motion for a temporary restraining order and an order of attachment. Both are designed to lock down your money before the case is decided.
The TRO freezes your bank accounts. The attachment order lets the sheriff (or marshal) actually seize what’s in them.
Why does a judge sign this without you in the room? The lender argues you’re a flight risk for the assets. They claim you’re moving money, opening new accounts, hiding deposits. They submit affidavits from their collections team. The standard is low, and the judges who hear these motions see them constantly.
What this means in practice:
- You get sued on Monday.
- The TRO motion is filed Tuesday.
- A judge signs it Wednesday morning.
- Your bank is served Wednesday afternoon.
- By Thursday, your accounts are frozen.
You will usually find out when you try to make payroll, and the transfer fails.
3. Post-Judgment Restraining Notice (CPLR 5222 in New York)
Once any MCA lender has a judgment against you – by COJ, by default judgment, or by winning at trial – the next move is a restraining notice. In New York this is governed by CPLR 5222, but every state has its equivalent.
The lender’s attorney serves the restraining notice directly on your bank. The bank is required to freeze up to twice the judgment amount in any account with your name, your business EIN, or any account where you’re a signatory.
A few things people don’t realize:
- The bank has to comply within hours of receiving it. Not days.
- The freeze applies to every account at that bank, not just your operating account. Savings, money market, the personal account you opened in 2014 and forgot about – all of it.
- If your spouse is on a joint account, that account gets frozen too.
- The restraining notice can be re-served every year, on every bank, in perpetuity, until the judgment is paid.
Most business owners we talk to don’t know which banks the lender will hit. The answer is – usually – all of them. They send the notice everywhere.
4. Information Subpoena to Find Every Account You Have
Before they restrain accounts, they have to find them. This is what an information subpoena does.
Once a judgment is entered, the lender’s attorney sends an information subpoena with restraining notice to every bank they think you might use. Chase, BofA, Wells, Citi, the regional banks, the online banks (Mercury, Relay, Bluevine, Brex), the credit unions. They send it to all of them.
Each bank is legally required to respond, telling the lender:
- Whether you have an account there
- The account numbers
- The current balances
- Any other accounts where you’re a signatory
Many lenders also subpoena your bookkeeper, your accountant, your CPA, your payment processor, and your customers for the same information. Some send subpoenas to your wife. Some send them to business partners.
This is the discovery phase that makes the freeze possible. By the time the restraining notice goes out, they know exactly where the money is.
5. Draining the ACH Until Nothing Is Left
This one isn’t legal process – it’s just operational. When you signed the MCA, you gave the lender ACH authorization to debit your account daily. At default, many funders stop being polite about how much they pull.
What you’ll see:
- The daily debit gets pulled multiple times in one day.
- Some funders attempt lump sum debits for the full remaining balance, hoping the bank lets it through.
- If your account has $40,000 in it on a Friday, and your daily debit is $1,200, you may find $20,000+ pulled by Monday morning.
- Each failed debit triggers an NSF fee from the bank ($35 average) and a returned payment fee from the lender ($35-$100).
This is technically a breach of the funding agreement on the lender’s part – they’re only supposed to pull the agreed amount. But by the time you challenge it, the cash is already gone, and you’re now the one chasing them. They know this.
The only way to stop it is to revoke ACH authorization at the bank, in writing, immediately – and most business owners don’t know they can do this until it’s too late.
6. UCC-1 Notification to Your Customers and Processor
This isn’t a freeze on your bank account directly – it’s a freeze on the money before it ever reaches the bank. When the lender funded you, they filed a UCC-1 financing statement against your receivables. Most business owners signed this without reading it.
At default, the lender sends notices – under UCC Article 9 – to:
- Your customers (the ones on your bank statements)
- Your merchant processor (Stripe, Square, Clover, Fiserv, whoever)
- Your factoring company, if you have one
- Any platform that pays you (Amazon, Shopify, DoorDash, Uber)
The notice instructs them to redirect all future payments to the funder, not to you. Federal and state law requires them to comply – if they don’t, they can be on the hook for paying twice.
What this means: even if your bank account isn’t frozen, no money is coming in. Your inflows get rerouted to the lender’s account. You’re choked off from the top of the funnel, not the bottom. For most businesses this is more devastating than the bank freeze itself, because the bank freeze ends when the judgment is paid. The UCC notification keeps redirecting cash for as long as the receivable exists.
7. Going After the Personal Guarantor’s Accounts
Almost every MCA agreement has a personal guarantee. That signature on page 14 you skimmed at funding – that’s the document that lets the lender freeze your personal accounts, not just your business accounts.
Once they have a judgment against the personal guarantor (which is usually you), they can:
- Freeze your personal checking and savings
- Freeze your personal brokerage accounts (Schwab, Fidelity, Robinhood)
- Garnish your wages from any W-2 employment
- Restrain your spouse’s joint accounts
- Place liens on your home, your cars, anything titled in your name
In community property states (California, Texas, Arizona, and others), they can sometimes reach assets in your spouse’s name alone. The personal guarantee turns a business problem into a household problem in about 72 hours.
This is the part that destroys families. We’ve seen guarantors lose access to their kids’ college funds, their savings, their retirement money – all from one frozen MCA on a business that was already failing.
8. Merchant Processor Lockbox Takeover
The most aggressive funders don’t wait for judgments at all. They go directly to your merchant processor, present the funding agreement (which usually contains a clause assigning processor proceeds to them at default), and demand that the processor reroute all credit card settlements to the lender’s bank account.
This is sometimes called a “lockbox” arrangement. Some funders set this up at funding, dormant, and activate it at default. Others negotiate it on the fly.
What happens next:
- Every credit card swipe at your business goes to the funder’s account, not yours.
- You can’t change processors, because the funder will send the same notice to the new one.
- Your daily settlement disappears entirely. You’ll see $0 hit your bank, while your sales reports show normal volume.
- If you try to switch to cash-only or a personal Square account to get around it, you’re now committing fraud under the funding agreement – which gives the funder grounds to escalate further.
The lockbox is the funder’s nuclear option for businesses with strong card volume. Restaurants, retail, e-commerce, healthcare practices – anyone with consistent processor settlements is vulnerable to this.
What To Do If Any of These Are Already in Motion
Speed is everything. Once a freeze is in place, every hour matters. The longer the freeze sits, the more downstream damage it does – missed payroll, bounced rent checks, vendor shutdowns, loss of merchant processing, and eventually employee resignations and customer loss.
A few things to do immediately:
- Do not move money to a new account in your name or your business’s name. They will find it within 48 hours via subpoena, and the move itself can be characterized as fraudulent transfer.
- Do not open a new bank account at a bank you’ve never used. Same problem – it gets found, and now you’ve created a paper trail that hurts you.
- Do not stop responding to the lender entirely. Silence accelerates the legal process. A simple “we’re working on it” buys you days.
- Get the actual MCA agreement in front of someone who reads them for a living. Most agreements have defenses – usury, criminal interest rates, misrepresentation in formation, COJ defects – that can be used to vacate judgments or negotiate reductions.
- Call us. We’ve negotiated over $100M in MCA settlements. We know which funders settle, which sue, which freeze first, and which can be reasoned with.
If you’re at the point where one or more of these 8 freezes has already happened – the goal isn’t to undo it overnight. The goal is to stop the bleeding, get a payment plan or settlement in place, and get the restraining notice lifted. That’s a process measured in weeks, not days. But it starts with a conversation.
