Revenue Purchase Agreements Are Not Usurious Loans Where Repayment Is Contingent: Reconciliation, No Finite Term, and No Bankruptcy Recourse

1. Introduction

This appeal arose from a dispute over a “revenue purchase agreement” under which plaintiff NewCo Capital Group LLC advanced funds to the merchant defendants (the “entity defendants”) in exchange for 7% of future business revenues until a contractually defined “purchased amount” (greater than the amount advanced) was remitted. Defendant Jaime Rafael Soto signed a personal guaranty.

After a claimed default—triggered when a weekly remittance was returned for insufficient funds and the merchant allegedly failed to request a timely reconciliation or adjustment—NewCo sued for breach of the agreement and guaranty and moved for summary judgment.

On appeal, defendants challenged (i) the admissibility of plaintiff’s proof as business records under CPLR 4518(a), (ii) whether plaintiff met its summary-judgment burden on breach and damages, and (iii) whether the agreement was void as a criminally usurious loan or otherwise unenforceable as unconscionable.

2. Summary of the Opinion

The Fourth Department unanimously affirmed the judgment awarding damages and attorneys’ fees to plaintiff. It held that:

• Plaintiff laid a sufficient foundation for business records through its manager’s affidavit under CPLR 4518(a).
• Plaintiff established the elements of breach of contract and entitlement to summary judgment.
• The transaction was a revenue purchase agreement, not a loan; therefore, New York usury laws did not render it void.
• Defendants failed to raise a triable issue of fact on unconscionability, submitting no opposing evidence and not pleading lack of meaningful choice.

3. Analysis

3.1 Precedents Cited (and How They Shaped the Decision)

A. Appellate procedure: appeal deemed taken from judgment

• AH Wines, Inc. v C6 Capital Funding LLC, 208 AD3d 1623 (4th Dept 2022), appeal dismissed 39 NY3d 1172 (2023): Cited to support the procedural treatment of a notice of appeal from an order granting summary judgment as specifying the subsequently entered judgment, consistent with CPLR 5501(c). This cleared any technical obstacle to reaching the merits.

B. Business records foundation under CPLR 4518(a)

• Bank of N.Y. Mellon v Anderson, 151 AD3d 1926 (4th Dept 2017): Used for the proposition that an affidavit from a witness “personally familiar” with a company’s record-keeping practices can authenticate business records. The court relied on this to validate the manager’s affidavit as an adequate CPLR 4518(a) foundation.
• Bank of Am., N.A. v Greene, 216 AD3d 718 (2d Dept 2023): Reinforced that properly supported business records may be considered on summary judgment. The citation underscored the cross-departmental consistency of CPLR 4518(a) standards.

C. Breach of contract elements and summary judgment proof

• Niagara Foods, Inc. v Ferguson Elec. Serv. Co., Inc., 111 AD3d 1374 (4th Dept 2013), lv denied 22 NY3d 864 (2014), and Pearl St. Parking Assoc. LLC v County of Erie, 207 AD3d 1029 (4th Dept 2022): Cited for the standard four elements—contract, performance, breach, damages—framing the court’s evaluation of plaintiff’s submissions.
• Tapp Partners, LLC v Wall Sections Inc., 244 AD3d 1727 (4th Dept 2025): Invoked as a recent Fourth Department example supporting summary judgment where the moving party’s submissions establish the breach framework.
• Bridge Funding Cap LLC v SimonExpress Pizza, LLC [appeal No. 2], 240 AD3d 1186 (4th Dept 2025): Cited both as a comparator on breach proof and, more importantly, as a leading Fourth Department authority on distinguishing revenue-purchase agreements from loans.

D. Usury applies only to loans; the “real character” inquiry

• Seidel v 18 E. 17th St. Owners, 79 NY2d 735 (1992): Provided two key propositions: (1) usury laws apply only to loans; and (2) absent a loan, “there can be no usury, however unconscionable the contract may be.” This anchored the court’s threshold move—classify the transaction—before engaging any rate-based usury analysis.
• Adar Bays, LLC v GeneSYS ID, Inc., 37 NY3d 320 (2021): Cited for the principle that if a loan is usurious, the transaction may be void and unenforceable, highlighting the high stakes of classification. The court also referenced Adar Bays in connection with looking to the transaction’s substance.
• Davis v Richmond Capital Group, LLC, 194 AD3d 516 (1st Dept 2021): Cited alongside Adar Bays on the voiding consequences of usurious loans, reflecting appellate recognition of aggressive “MCA-as-loan” challenges.
• True Bus. Funding, LLC v Guerrero A Constr. Corp., 239 AD3d 787 (2d Dept 2025): Quoted for the “totality”/“real character” test: courts look past labels and evaluate the substance of the transaction, a key methodological step in MCA litigation.

E. The “absolute entitlement to repayment” test and the three-factor framework

• Samson MCA LLC v Joseph A. Russo M.D. P.C./IV Therapeutics PLLC [appeal No. 2], 219 AD3d 1126 (4th Dept 2023): Cited for the central question: whether the funder is “absolutely entitled to repayment under all circumstances.” It also supported the proposition that “bankruptcy safe-harbor” language can negate recourse and thus indicate contingent repayment.
• LG Funding, LLC v United Senior Props. of Olathe, LLC, 181 AD3d 664 (2d Dept 2020): Cited as part of the broader appellate consensus that the inquiry turns on whether repayment is contingent rather than absolute.
• Kapitus Servicing, Inc. v Suburban Waste Servs., Inc., 246 AD3d 661 (1st Dept 2026): Cited to demonstrate that the three-factor MCA framework is applied across departments, strengthening predictability and uniformity.
• Bridge Funding Cap LLC v SimonExpress Pizza, LLC [appeal No. 2], 240 AD3d 1186 (4th Dept 2025), and True Bus. Funding, LLC v Guerrero A Constr. Corp., 239 AD3d 787 (2d Dept 2025): Both cited for the commonly weighed three factors: (1) reconciliation, (2) finite term, and (3) bankruptcy recourse.
• Oakshire Props., LLC v Argus Capital Funding, LLC, 229 AD3d 1199 (4th Dept 2024): Used as a contrasting “cf.” citation on illusory reconciliation—signaling that a reconciliation clause must be meaningful, not merely nominal.

F. Unconscionability: legal standard and evidentiary showing

• Wilson Trading Corp. v David Ferguson, Ltd., 23 NY2d 398 (1968): Cited for the proposition that unconscionability is a question of law informed by the agreement’s commercial setting, purpose, and effect.
• Gillman v Chase Manhattan Bank, 73 NY2d 1 (1988): Supplied the governing dual requirement—procedural and substantive unconscionability—and the factors relevant to the procedural prong (pressure tactics, fine print, sophistication, bargaining power, and meaningful choice).
• Matter of Lawrence, 24 NY3d 320 (2014), rearg denied 24 NY3d 1215 (2015), and Divito v Fiandach, 200 AD3d 1564 (4th Dept 2021): Reinforced Gillman’s framework and its application in the Fourth Department.
• Baron Assoc., LLC v Garcia Group Enters., Inc., 96 AD3d 793 (2d Dept 2012): Cited to underscore that a party cannot defeat summary judgment on unconscionability with conclusory attacks on provisions alone—there must be evidence of lack of meaningful choice or procedural unfairness, and appropriate pleading allegations.

3.2 Legal Reasoning

A. The court accepted plaintiff’s documentary proof as business records

Defendants attempted to block summary judgment by challenging the admissibility of plaintiff’s records. The court held the manager’s affidavit satisfied CPLR 4518(a) because he attested to personal familiarity with plaintiff’s record-keeping practices, tracking the approach approved in Bank of N.Y. Mellon v Anderson and applied in Bank of Am., N.A. v Greene. With the records considered, defendants lost a common procedural lever for creating triable issues.

B. Plaintiff met its summary-judgment burden on breach, default, and damages

Applying Niagara Foods, Inc. v Ferguson Elec. Serv. Co., Inc., the court found plaintiff established: the agreement’s existence, plaintiff’s performance (advancing funds), breach (default under the agreement’s terms), and resulting damages. The default was tied to a returned remittance coded “R01 - Insufficient Funds” and defendants’ failure to request reconciliation/adjustment within one business day.

C. Classification: the agreement was not a loan, so usury did not apply

The opinion’s center of gravity is the threshold usury inquiry framed by Seidel v 18 E. 17th St. Owners: usury attaches only to loans. The court then used the “real character” approach from True Bus. Funding, LLC v Guerrero A Constr. Corp. and the “absolute entitlement to repayment” test from Samson MCA LLC v Joseph A. Russo M.D. P.C./IV Therapeutics PLLC [appeal No. 2].

The court emphasized the commonly used three-factor framework (reconciliation, finite term, bankruptcy recourse), citing Bridge Funding Cap LLC v SimonExpress Pizza, LLC [appeal No. 2], Kapitus Servicing, Inc. v Suburban Waste Servs., Inc., and True Bus. Funding, LLC v Guerrero A Constr. Corp..

• Reconciliation: The agreement contained two reconciliation provisions allowing retroactive and prospective modification upon request with proof of revenue. The court rejected the argument that these provisions were “convoluted,” “illusory,” or left reconciliation to plaintiff’s sole discretion, distinguishing cases like Oakshire Props., LLC v Argus Capital Funding, LLC where reconciliation may be functionally ineffective.
• No finite term: The agreement lacked a fixed term or payment schedule; payments could change based on reconciliation, aligning with the reasoning in Bridge Funding Cap LLC v SimonExpress Pizza, LLC [appeal No. 2].
• No bankruptcy recourse: The agreement expressly stated that bankruptcy, business slowdown, or collection delays “in and of itself” did not constitute a breach, supporting the conclusion that plaintiff lacked recourse upon bankruptcy, consistent with Samson MCA LLC.

With repayment contingent rather than absolute, the court concluded the agreement was a true revenue purchase agreement, not a loan—making the criminal usury defense inapplicable, notwithstanding the voiding consequences described in Adar Bays, LLC v GeneSYS ID, Inc. and Davis v Richmond Capital Group, LLC.

D. Unconscionability failed for lack of evidence and lack of a procedural showing

Relying on Wilson Trading Corp. v David Ferguson, Ltd. and Gillman v Chase Manhattan Bank, the court reiterated that unconscionability generally requires both procedural and substantive elements. Defendants attacked certain provisions as unfair, but they submitted no evidence in opposition and did not allege in their answer that they lacked meaningful choice—defects that, under Baron Assoc., LLC v Garcia Group Enters., Inc., prevent the creation of a triable issue.

3.3 Impact

• Strengthens enforceability of “MCA”/revenue-purchase structures in the Fourth Department when drafters include (i) a workable reconciliation mechanism, (ii) no fixed term, and (iii) non-recourse bankruptcy language. The decision consolidates a line of Fourth Department cases (notably Samson MCA LLC and Bridge Funding Cap LLC) into a predictable template for analysis.
• Signals litigation burdens at summary judgment: merchant-defendants opposing enforcement should expect to need competent evidence (not just arguments) to raise triable issues on illusory reconciliation or unconscionability.
• Practical drafting and compliance consequence: reconciliation must be more than a label. The court’s citation to Oakshire Props., LLC as a contrast suggests judicial sensitivity to clauses that purport to reconcile but functionally prevent it (e.g., sole discretion, unrealistic timing, or evidentiary barriers).
• Business-record affidavits remain a critical enforcement tool: a manager’s “personally familiar” affidavit can be sufficient to admit transactional records, reducing the cost and friction of proving default and damages in commercial finance disputes.

4. Complex Concepts Simplified

• Revenue purchase agreement vs. loan: In a true revenue purchase, the funder buys a slice of future receipts; repayment depends on how the business performs. In a loan, the borrower must repay a fixed principal (and often interest) regardless of performance.
• “Absolute entitlement to repayment”: The legal shorthand for whether the funder must be repaid no matter what. If yes, courts are more likely to treat the deal as a loan. If repayment can legitimately decrease or slow when revenues drop, it looks less like a loan.
• Reconciliation provision: A contractual mechanism allowing remittances to be adjusted to match actual revenue (so payments track performance rather than remain fixed).
• Finite term: A fixed end date or rigid payment schedule suggests loan-like certainty; an open-ended term tied to revenue suggests a purchase of receivables/revenue.
• Bankruptcy recourse: If the funder can declare default simply because the merchant files bankruptcy, that resembles lender recourse and pushes the deal toward “loan.” Language disclaiming bankruptcy as a breach supports contingent repayment.
• Criminal usury: A defense that, if applicable to a loan, can render the transaction void. But it is irrelevant unless the deal is first classified as a loan.
• Unconscionability (procedural and substantive): Procedural focuses on unfairness in how the contract was formed (pressure, hidden terms, lack of choice). Substantive focuses on whether the terms are unreasonably one-sided. Typically both must be shown.
• CPLR 4518(a) business records: New York’s rule for admitting records created in the regular course of business, typically proven by an affidavit from someone familiar with the entity’s record-keeping practices.

5. Conclusion

NewCo Capital Group LLC v SPE Trading, Inc. reinforces a now-settled analytical pathway in New York for merchant cash advance/revenue-purchase litigation: courts will look past labels and ask whether repayment is absolute or contingent. By crediting meaningful reconciliation provisions, the absence of a finite term, and the lack of bankruptcy recourse, the Fourth Department concluded the agreement was a revenue purchase—not a loan—and therefore not subject to usury. The decision also underscores two practical points for future cases: properly supported business records are potent on summary judgment, and unconscionability defenses require concrete evidence of procedural unfairness, not merely attacks on harsh terms.