The Legal Ground You’re Standing On
Alabama MCA law: the three facts that shape every option
Every resolution strategy — renegotiation, settlement, defense, refinancing — plays out differently depending on these three pieces of Alabama law. A firm that can’t speak to them isn’t the best firm for a Alabama file.
1Usury limits & the recharacterization question
Alabama's baseline usury caps (6% without a written contract, 8% with one — Ala. Code § 8-8-1) are removed by § 8-8-5 for any loan of $2,000 or more: businesses may agree to any rate, and the borrower and its guarantors are barred from even raising a usury defense (unconscionability survives, chiefly in consumer cases). The penalty where usury does apply (§ 8-8-12) is civil — forfeiture of all interest — and no criminal usury statute exists. Since nearly all MCA fundings exceed $2,000, § 8-8-5 would generally defeat a usury claim even after recharacterization, so an Alabama merchant's leverage lies in the COJ ban, procedural defenses, and bankruptcy treatment rather than rate caps.
Sources: Ala. Code § 8-8-5 (any rate at $2,000+; usury defense barred) · LegalClarity — Alabama usury framework (§§ 8-8-1, 8-8-5, 8-8-12)
2Confessions of judgment in Alabama
Void — with a 6-month annulment window Alabama prohibits pre-dispute confessions of judgment: under Ala. Code § 8-9-11, agreements made before commencement of an action to confess judgment — or authorizing another to confess judgment — are void, and a judgment taken on an unlawful confession "must be set aside and annulled on motion made within six months of entry." That six-month deadline is the operative detail: the protection is strong but not self-executing, so an Alabama merchant who discovers a confessed judgment must move within the window, not after. Funders have historically sought confessions in other states' courts instead.
Sources: Ala. Code § 8-9-11 (confessions void; 6-month motion)
3Commercial financing disclosure: where Alabama stands
Alabama has not enacted a commercial financing disclosure law — the March 2026 Venable survey lists ten enacted states with Alabama in neither the enacted nor pending column, and no Alabama sales-based-financing bill surfaced in 2025–26 legislative coverage. Alabama merchants hold no statutory right to pre-signing cost disclosures, and with § 8-8-5 neutralizing usury above $2,000, the contract's actual terms carry all the weight.
Sources: Venable — State Commercial Financing Disclosure Laws (Mar. 2026)
How funders actually enforce here: With § 8-9-11 voiding confessed judgments in Alabama courts, funders sue in their chosen forum and domesticate under Alabama's UEFJA (Ala. Code §§ 6-9-230 to -238): the authenticated judgment is filed in any circuit court with an affidavit that it is valid and unsatisfied, the clerk mails notice, and no execution may issue until 30 days after filing — during which the debtor can seek a stay or contest enforcement. Once domesticated, the judgment enforces like an Alabama judgment: certificate-of-judgment liens, execution, and garnishment of business accounts. Funders also file UCC-1 liens against receivables with the Alabama Secretary of State, which can freeze payments from processors and customers. No published Alabama MCA decision could be verified. Ala. Code §§ 6-9-230 to -238 — UEFJA (30-day window) · Christian & Small — domesticating foreign judgments in Alabama
