On February 23, 2026, Justice Weinmann of the Erie County Commercial Division issued a decision in Ilend Advance LLC v. Her Mktg. Concepts, Inc., 2026 NY Slip Op. 50382(U), holding that even though a merchant cash advance agreement’s reconciliation provision may favor the lender, that did not make the agreement an usurious loan, explaining:
[T]he eight-page agreement explicitly emphasizes in several sections that the transaction is not a “loan” which would bring with it the applicability of usury laws, amongst other things. Defendant makes the allegation that the transaction was indeed a loan, and therefore because the calculated annual interest rate of 1898% exceeds the civil cap of 16% and the criminal cap of 25%, it is usurious and thus illegal. There is no real calculation as to how this 1898% is derived, but that is inconsequential as to the determination as to whether the transaction is a loan or not.
Whether a financial agreement is a loan or a financial transaction with a security interest is determined in New York by a 3-factor test: (1) whether there is a reconciliation (I.e. adjustment) provision; (2) whether the agreement has an indefinite term; and (3) whether the plaintiff has any recourse should the merchant declare bankruptcy.
Applying this law to the facts at bar, it is evident that all 3 prongs are satisfied. First, the agreement does not contain any fixed term. It is set in a way to continue until such time as the merchant defendant has generated enough receivables to remit the entirety of the purchased amount to the plaintiff, however long that may take, and as such was not subject to any finite term period. As plaintiff rightly notes, if there is no revenue, no payment is due.
Second, plaintiff had no recourse under the agreement in the case of a bankruptcy. In other words, the aforementioned cases have illustrated that the risk in a loan is typically shouldered by the borrower, in contradistinction to an RPA, where the risk is typically shouldered by the lender. Here, in the event of a bankruptcy, plaintiff lender has no recourse.
Finally, the most salient issue at bar is whether there is a reconciliation provision. If there is not, then the transaction is finite and considered a loan, thus subject to usury laws amongst other restrictions. A review of the agreement reveals a reconciliation provision at section 1.4 called “Adjustments to the Remittance.” The procedure is laid out in two paragraphs, and plainly is very one-sided in its restrictions, thus tilting in favor of the lender. However, the caselaw cited above requires merely a reconciliation provision, not that it be equitable or even fair. In fact, RPAs are known for their predatory character precisely because so much downside risk is born by the lender.
Moreover, it must be noted that the merchant at bar never even requested a reconciliation or adjustment to the remittances. He simply stopped making the payments after $14,000 had been paid, leaving a significant balance. In sum, the arrangement at bar did not qualify as a loan, thus it could not by definition be usurious.
(Internal quotations and citations omitted).