Guide

Before You Sign: 12 Clauses That Decide Everything

Reconciliation, confession of judgment, prepayment, double-dipping on renewal. The clauses nobody reads to you, in plain English, with the exact question to ask about each one.

Nobody reads a funding contract to you. You get a call, a number you like, a link, and a signature box. The offer is usually described in two sentences and the document behind it runs fourteen pages. Almost every horror story in commercial finance — and there are many — comes out of four or five clauses buried in those pages, not out of the headline number.

This is the list we would want an owner to hold in their hand before signing anything, including anything we send. Twelve clauses, what each one does to you, and the exact question to ask. None of this is legal advice; it is the vocabulary that lets you ask a real question and hear whether the answer is straight.

1. The reconciliation clause (advances only)

A merchant cash advance is legally a purchase of future receivables, not a loan, and the whole structure depends on the payment moving with your sales. Reconciliation is the clause that lets you request a debit adjustment when revenue drops. A contract with no reconciliation language, or one where adjustment is "at the funder's sole discretion", is a fixed daily payment wearing a costume.

Ask: "If my deposits fall 30% next month, what is the written process to adjust the debit, how long does it take, and who decides?" You want a process, a timeline and a document list — not reassurance.

2. Confession of judgment

A confession of judgment is a signed admission of liability, filed in advance, that lets a funder obtain a judgment and freeze accounts without first proving a default in court. Federal rules ended their use against consumers, and New York — where much of this industry files — restricted out-of-state COJs in 2019, which pushed the practice into other states and other names. It may appear as an affidavit of confession, a stipulated judgment, or a power of attorney to confess.

Ask: "Does any document in this package let you obtain a judgment or restrain my bank account without notice to me?" A funder who will not answer that in writing is answering it.

3. The stacking ban and cross-default

Most agreements forbid taking additional financing while the balance is open. That is reasonable. What matters is the consequence: many contracts make a second advance an immediate event of default that accelerates the entire remaining balance at once. Owners who take a second advance to survive a slow month frequently trigger a demand for everything on the first one.

Ask: "If I take equipment financing or a line of credit while this is open, is that a default, and does the full balance accelerate?"

4. Prepayment — and whether early payoff actually saves anything

On a factor-rate product there is no interest to save; you owe the multiplied total whether you repay in five months or twelve. Some funders offer a written early-payoff discount. Most do not, and plenty of owners discover this only when they try to clear the balance. On interest-bearing loans the question is the opposite: is there a prepayment penalty, and is it a percentage or a guaranteed minimum interest amount?

Ask: "Put the payoff figure at month three, month six and month nine in writing." Three numbers settle it faster than any explanation.

5. The double dip on renewal

You are 70% through an advance and offered a renewal. The new advance pays off the old balance and hands you the difference — but the payoff amount includes the uncollected fixed cost of the old deal, and then the new factor rate is applied on top of that. You pay the cost of the first advance twice. This is the single most expensive pattern in the industry and it is presented as good news, usually by someone congratulating you.

Ask: "What is the net new cash to me, and what is the total cost of this renewal after the old balance is paid off?" Judge the renewal on net cash, never on the gross amount.

6. Fees taken out of funding

Origination, underwriting, packaging, ACH setup, "risk assessment", broker compensation. A $100,000 approval that nets $95,500 into your account is a $95,500 loan priced as if it were $100,000, and every cost calculation should use the net figure. Fees are also where a middleman's compensation hides.

Ask: "What is the exact dollar amount that will land in my account, and list every deduction." Then run the offer through our DSCR and true-cost calculator using that net number.

7. Personal guarantee and its scope

Nearly every small-business facility is personally guaranteed, and that is normal. What varies is scope: does it cover this advance only, or does it extend to future obligations and renewals automatically? Is a spouse required to sign? Is the guarantee limited in amount or unlimited?

Ask: "Is this guarantee limited to this transaction, and does it survive a renewal I have not yet agreed to?"

8. The UCC filing and what it covers

Funders file a UCC-1 to secure their position. A specific filing covers the equipment or the receivables in question. A blanket filing covers everything your business owns, which can block the cheaper lender you approach next month — and often does. It is public record; anyone underwriting you will see it.

Ask: "Is the UCC blanket or specific, and will you file a termination within X days of payoff?" Get the number of days in writing, then diary it.

9. The ACH authorization

Read what you are authorizing: the amount, the frequency, and whether the funder may change either one without a new signature. Watch for authorization to debit a second bank account, to re-present a returned debit multiple times, and the returned-payment fee — which in a bad week can multiply on its own.

10. Holdback percentage vs fixed debit

A true holdback is a percentage of daily card or deposit volume, so it breathes with your sales. A fixed daily debit does not. Many contracts describe a holdback percentage in the narrative and then specify a fixed dollar debit in the schedule. The schedule governs.

Ask: "Is my payment a percentage of deposits or a fixed dollar amount? Show me the line in the schedule."

11. Default triggers you would never guess

Beyond missing payments, common triggers include: changing your bank account or processor without consent, allowing a balance below a stated minimum, a negative day, closing a location, a change of ownership, a new tax lien, or "any material adverse change" — a phrase broad enough to mean whatever is convenient later. Ask for the list to be read aloud and note which ones you might trip on a normal bad week.

12. Venue, arbitration and who pays the lawyers

The last page decides where any dispute happens and who funds it. A contract that puts venue in a distant state, waives a jury, forbids class participation and assigns all collection costs and legal fees to you is not unusual — but you should sign it knowing that a $40,000 disagreement will be uneconomic for you to contest.

Read these three numbers together, then decide

Net cash into your account — after every fee.
Total dollars repaid — not the rate, not the factor. The dollars.
Your DSCR with the new payment in it — below 1.0 the payment is bigger than the profit, and the deal will be repaid out of your next advance instead of out of your business. Run it here.

Where we stand. We are paid by the funder when a deal closes, and we are paid more on some products than others. That is exactly why this page exists in public: an owner who reads their contract closes fewer bad deals and stays a client for years, and a business that survives its first facility comes back for the second. If a funder — including us — will not answer the twelve questions above in writing, that is your answer.

Program guidelines shown are our lending partners' published minimums as of September 2026 and can change. They are qualification floors, not an offer. Reviewed and maintained by the Goldspur Capital funding desk. This is general information about commercial finance products, not financial, legal or tax advice for your specific situation.