Direct answer
An MCA funder can't freeze your bank account on its own. A freeze needs a court judgment; after that the funder can have your bank restrain or levy the account under that state's collection rules. Before a judgment, what looks like a freeze is usually something else: daily ACH debits draining the balance, a hold your own bank placed, or your card processor holding or redirecting settlements after the funder sent it a notice under its UCC lien.
Key takeaways
- A court judgment comes before any real freeze by a funder.
- In New York, a restraining notice on a bank can hold up to twice the judgment amount.
- Daily debits, bank holds and processor holds can look like a freeze but aren't one.
- Moving money to a new account to dodge a funder is usually a default and can make things worse.
Four things that look like a frozen account
Work out which one you are dealing with first, because each has a different fix.
How a judgment turns into a freeze
- The funder sues, usually in the court the contract names.
- It gets a judgment, either after you respond and lose or by default if you don't respond in time.
- It serves the judgment on your bank. In New York this is a restraining notice; other states call it a levy or garnishment.
- The bank holds the funds, then pays them to the funder if the judgment isn't paid, settled or vacated.
- Why the response deadline matters: Many freezes come from default judgments, where the business never answered the lawsuit. If you are served, the deadline to respond is short. A lawyer may be able to challenge a judgment if you weren't properly served.
Worked example: how much a restraint can hold
Say a funder gets a $25,000 judgment against your business in New York, and your account holds $40,000, including next week's payroll.
A New York restraining notice can hold up to twice the amount owed, $50,000 here, so the bank can hold all $40,000. Payroll, rent and tax money in that account is caught along with everything else. A restraining notice on a bank can last up to a year unless the judgment is paid or the court lifts it.
Protect your cash flow before it gets here
- Track every expected and actual debit so you see a problem weeks before a missed payment.
- Use your contract's reconciliation clause when sales fall, in writing.
- Keep copies of contracts, payoff letters and every funder message.
- Don't open a new account to hide receivables from a funder; contracts usually treat it as a default.
- If you're served with a lawsuit, respond before the deadline.
- General information: Collection rules differ by state, and this guide uses New York as the main example because many MCA contracts choose New York law. It is not legal advice.
Common questions
- Can an MCA company take money from my account without permission? Your contract's ACH authorization lets the funder debit the agreed amount. Debits beyond what you authorized can be disputed with your bank, but business accounts have much shorter dispute windows than personal ones, so raise it right away.
- Can I just open a new bank account? Most MCA contracts require notice before you change accounts, and switching without it is usually a default. It can also be treated as diverting the receivables the funder bought, which makes a lawsuit more likely.
- How long does a bank restraint last? Until the judgment is paid, settled or vacated, or the restraint expires. In New York, a restraining notice on a bank lasts up to a year.