High-stakes lawsuits. Policy shake-ups. New refinancing rules.
Onyx IQ is back with another edition of our quarterly series focused on the latest headlines, legal updates, and policy shifts shaping the MCA industry.
As always, we break down the most significant developments to help you strengthen and refine your funding playbook.
Need to catch up on previous merchant cash advance trends? Get caught up here:
- 2024: Q1, Q2, Q3, Q4, Biggest MCA Stories of 2024
- 2023: Q1, Q2, Q3, Q4, Biggest MCA Stories of 2023
- 2022: Top MCA Stories of 2022
Now, let’s get into Q1 2025!
1. Yellowstone Settlement Marks MCA Industry Turning Point
Early last year, we reported on the $1.4 billion lawsuit brought against Yellowstone Capital, now known as Delta Bridge Funding or Cloudfund.
If you recall, the company was sued by the New York Attorney General (NYAG) for disguising predatory loans as MCAs and then charging merchants as much as 820% interest per year. That’s more than 50 times the legal rate!
As if that weren’t bad enough, instead of taking a portion of business revenue (as actual MCAs do), Yellowstone withdrew fixed daily payments—regardless of its clients’ actual earnings.
The impact was massive, affecting more than 18,000 small enterprises across the U.S. Many had to lay off employees, even shutting down operations altogether. In the most tragic cases, one SME owner even reported attempting suicide due to overwhelming financial pressure.
Well, that case recently culminated in a historic $1.065 billion judgment, delivering much-deserved justice to SME owners across the country.
As part of the judgement:
- Over $534 million in small business debt will be wiped clean, offering relief to Yellowstone clients.
- $16.1 million has already been returned to defrauded businesses, putting real money back into their hands, with more restitution likely to come.
- Yellowstone and its executives are permanently banned from the industry, representing a major win for the long-term integrity of the MCA sector.
This ruling makes two things very clear. First, merchant cash advances should empower small enterprises, not exploit them. Second, those who abuse the system will face major consequences.
Onyx IQ commends the NYAG’s continued efforts to remove bad actors and protect SME owners across the country.
2. SBA Expands MCA Refinancing Options Under 7(a) Loans
Here’s some potentially big news for merchants struggling with MCA repayments: A new SBA Procedural Notice states that MCAs may be eligible for refinancing under the SBA 7(a) loan program.
This is part of SBA’s aim to provide a better financing option for SME owners burdened by merchant cash advance debt.
That said, strict eligibility criteria apply, including:
- Merchants must demonstrate solid cash flow, strong business and personal credit.
- Merchants must have used the MCA to improve financial terms for business purposes.
- Funders must agree to refinance and release any liens.
So what does this mean for the MCA funding industry—and how should funders view this?
- First, it’s great to see that the SBA views merchant cash advances in a positive light. In its notice, the SBA refers to MCAs as “helpful tools for capitalization” for smaller enterprises.
- Second, SBA refinancing provides a legitimate way out for SMEs trapped in harmful funding agreements, offering a far more reliable and trustworthy alternative to what shady debt settlement companies offer.
Ultimately, the SBA’s latest move reinforces that, when administered responsibly, MCAs can be valuable financial tools. At the same time, it underscores the importance of transparency, ethical practices, and standing apart from bad actors.
3. CFPB Rule Gets Legal Backing
Last year, we covered a major legal challenge brought by the Revenue Based Finance Coalition (RBFC) against the Consumer Financial Protection Bureau (CFPB).
At the center of the dispute? The CFPB’s controversial “Final Rule” under Section 1071 of the Dodd-Frank Act. This rule would require SME funders, including those offering MCAs, to collect and report more detailed funding data.
The RBFC argued that MCAs and similar sales-based financing should be excluded from the rule, as they aren’t considered “credit” under the Equal Credit Opportunity Act (ECOA) due to their unique structure compared to traditional loans.
But in February 2025, a Florida magistrate judge sided with the CFPB, stating that merchant cash advances do indeed qualify as credit as per the ECOA—and that the CFPB had acted within its rulemaking authority.
So, what happens now?
First, it’s important to note that the matter isn’t yet fully settled. The district court still needs to adopt the findings before it can be enforced.
Moreover, with ongoing uncertainty surrounding the future existence of the CFPB itself, the rule’s long-term future remains up in the air.
Still, there remains the possibility that this ruling could have major implications. It reinforces the CFPB’s ability to regulate alternative finance products. It also creates a precedent for classifying MCAs as credit for compliance and reporting purposes.
No matter how this unfolds, it’s yet another reminder that MCA funders should regularly review their contracts, consult legal counsel, and ensure they’re aware of and prepared for potential regulatory shifts.
4. Mike Lindell Sues… Again
The MyPillow MCA saga continues!
Last year, Mike Lindell, CEO of MyPillow, filed a series of lawsuits against multiple MCA providers, accusing them of fraud and predatory lending tactics.
In response, those funders quickly pushed back with countersuits, alleging Lindell defaulted on millions in repayments.
And wouldn’t you know it: Lindell is back at it again in 2025, this time with a fresh new lawsuit against Merchant Capital. In his complaint, he’s claiming the company issued him a $2 million advance under “one-sided and unconscionable” terms.
If you’re keeping count, Lindell’s cumulative MCA-related debt is now well into the millions of dollars. And with new rumblings from Riverside Capital and Samson Horus, those numbers are likely to keep climbing.
Though Lindell’s victim claims may be hard to take seriously, these high-profile lawsuits could have real implications for the merchant cash advance industry, playing a pivotal role in shaping public perception of MCAs.
So far, there appears to have been little sympathy or support for Lindell’s attempts to misrepresent the industry. So that’s a positive sign.
But, as history has taught us, the “Pillow Guy” is not one to back down—so we expect to see more theatrics in the coming months.
Anticipate, Adapt, and Act With Onyx IQ
From billion-dollar lawsuits to new refinancing pathways and regulatory rulings, Q1 2025 once again proved that MCA funders cannot afford to remain stagnant.
To be successful, it’s not enough to just react to change—top funders anticipate, adapt, and act with intention.
At Onyx IQ, we help merchant cash advance funders do exactly that.
Providing real-time industry insights, our all-in-one automated MCA funding platform optimizes your operations so you can better protect your portfolio, streamline your processes, and outperform the competition.
Want to see how Onyx IQ can supercharge your MCA funding strategy? Book your personalized demo today— and start funding smarter.
