The Legal Ground You’re Standing On
Georgia 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 Georgia law. A firm that can’t speak to them isn’t the best firm for a Georgia file.
1Usury limits & the recharacterization question
Georgia's usury framework (O.C.G.A. § 7-4-2) caps written-contract interest at 16% only where the principal is $3,000 or less, lets parties agree to any written rate between $3,000 and $250,000 subject to § 7-4-18, and imposes essentially no restriction at $250,000 or more; § 7-4-18 makes charging over 5% per month (60% per year) on a loan a misdemeanor. These caps apply to loans — and the Supreme Court of Georgia held in Ruth v. Cherokee Funding (2018) that an advance whose repayment is contingent is not a "loan" under Georgia lending statutes, the reasoning MCA funders rely on. But recharacterization cuts the other way too: in In re GMI Group (Bankr. N.D. Ga. 2019), the court refused to treat one MCA as a true sale because its terms effectively guaranteed repayment — while upholding a different funder's agreement as a genuine purchase the same day. The contract's actual terms decide everything.
Sources: O.C.G.A. § 7-4-2 (interest rates) · O.C.G.A. § 7-4-18 (criminal penalty, 5%/month) · Ruth v. Cherokee Funding, LLC (Ga. 2018)
2Confessions of judgment in Georgia
No clerk-entered confessions — suit required Georgia doesn't ban confessions of judgment outright, but O.C.G.A. § 9-12-18 allows one to be entered only in the county where the defendant resided at commencement of an action that was "regularly filed and docketed as in other cases." That eliminates the New York-style practice of converting a contract clause into a judgment through a clerk without a lawsuit — so MCA confession clauses have little practical use inside Georgia courts. Combined with New York's 2019 bar on COJs against out-of-state debtors, Georgia merchants are largely insulated from surprise confessed judgments.
Sources: O.C.G.A. § 9-12-18 (confession of judgment; filed action required) · NY CPLR 3218 (2019 residence restriction)
3Georgia Commercial Financing Disclosure Law (SB 90): what funders must tell you
Signed May 1, 2023 as an amendment to Georgia's Fair Business Practices Act (O.C.G.A. § 10-1-393.18 et seq.), with mandatory compliance for covered transactions on or after January 1, 2024. Providers of commercial financing of $500,000 or less — expressly including merchant cash advances — must disclose before closing: funds provided, amount financed, finance charge, APR, payment schedule, prepayment terms, and variable-payment methodology; brokers are barred from charging advance fees. Banks and their affiliates are exempt. The Georgia Attorney General has exclusive enforcement authority ($500 per violation up to $20,000, more for knowing repeat violations); there is no private right of action.
Sources: SB 90 bill text (Georgia General Assembly) · Buchalter — Georgia CFDL client alert (Jan. 1, 2024 compliance) · Alston & Bird — state disclosure-law survey
How funders actually enforce here: With clerk-entered confessions unavailable in Georgia and New York COJs closed to out-of-state debtors since 2019, funders enforcing against Georgia businesses sue in their chosen forum (commonly New York) or in Georgia courts, then domesticate out-of-state judgments under O.C.G.A. § 9-12-132 — after which the judgment enforces like a Georgia judgment. Bank accounts are reached through garnishment under O.C.G.A. Title 18, Chapter 4, and funders routinely perfect UCC-1 liens in Georgia's centralized UCC index (GSCCCA), which can disrupt other financing until released. O.C.G.A. § 9-12-132 (foreign judgment domestication) · O.C.G.A. § 18-4-1 (garnishment) · GSCCCA — UCC index search
