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Kapitus Lawsuit: What to Know If You've Been Sued (2026)

Sued by Kapitus? Here's what the company is, typical contract terms, common defenses, and how to verify your case on PACER and state courts.

By Bar Alezrah10 min readPublished April 16, 2026 · Updated April 16, 2026

If Kapitus has filed suit against your business, you are dealing with one of the more established MCA funders in the industry, not a fly-by-night operation. That matters because Kapitus has real legal infrastructure, uses experienced collections counsel, and litigates frequently in New York courts. It also means the case is unlikely to disappear if you ignore it. This guide covers what Kapitus is, where it files, what its contracts look like, and what defenses exist. Read it, then find a licensed attorney before your response deadline.

Who Kapitus Is

Kapitus was founded in 2006 under the name Strategic Funding Source, headquartered in New York City. It rebranded to Kapitus in 2019. The company is one of the longer-tenured independent MCA funders in the United States, having operated through the 2008 financial crisis, the post-crisis growth years for alternative small business finance, and into the current period.

Kapitus offers merchant cash advances, equipment financing, SBA loans through partner lenders, and revenue-based financing. It has a direct sales force and also works through an ISO (independent sales organization) network, which means brokers and intermediaries may have originated your deal.

One notable feature of the Kapitus business model is its participation in a partner and co-funder network. Kapitus has relationships with other funders and in some cases participates in deals as a co-investor or as a funder that takes a position alongside another MCA company. If you have multiple MCA balances outstanding, one or more may trace back to the Kapitus network even if you do not immediately recognize the name on every agreement.

Stacking -- the practice of taking multiple simultaneous MCA positions from different funders against the same business's receivables -- is a known concern in the industry. When multiple funders are each collecting a holdback percentage from the same revenue stream, the combined effective burden on a business can become unmanageable quickly. If you are dealing with multiple MCA lawsuits, not just Kapitus, that context is important for understanding your overall position. Read more about the full landscape in our MCA attorney complete guide.

Where Kapitus Typically Files Suit

Kapitus is a New York City-based company, and its MCA agreements typically contain New York governing law and forum selection clauses. Most Kapitus litigation is filed in New York courts: the New York Supreme Court (Commercial Division for larger amounts, Civil Court for smaller claims) or in federal court in the Southern District of New York when federal jurisdiction exists.

New York's Commercial Division is the primary venue for larger Kapitus MCA cases. That court has developed substantial case law on merchant cash advances, including decisions on recharacterization, the validity of confession of judgment clauses, and reconciliation requirements. Attorneys who regularly handle MCA litigation are familiar with this court's tendencies.

Cases below the Commercial Division monetary threshold may be filed in New York Civil Court or in other New York county courts. The specific courthouse depends on dollar amounts and the parties' locations.

If Kapitus or a partner funder filed in your home state rather than New York, your agreement may have had a different forum clause, or the plaintiff may have chosen to file locally for strategic reasons. Search both New York dockets and your state's docket to locate your specific case.

Common Contract Terms in Kapitus Agreements

Kapitus MCA agreements contain features common across the industry, though your specific contract may differ in the details. Understanding the standard structure helps you identify the key provisions in your deal.

Factor rate and purchased amount. Kapitus agreements, like all MCAs, express the cost as a factor rate. You receive an advance (the funded amount) and agree to repay a larger purchased amount. The difference is the cost of capital. Factor rates vary based on risk assessment, industry, and term.

Holdback percentage. A specified percentage of daily or weekly receipts is remitted to Kapitus until the full purchased amount is recovered. Unlike a fixed loan payment, this amount fluctuates with revenue -- at least in theory. In practice, many funders collect via daily ACH debits rather than a true dynamic percentage of receivables.

Reconciliation provision. A legitimately structured MCA should allow the merchant to request a holdback adjustment when revenues decline. The reconciliation clause is a key provision to find in your agreement. If Kapitus or a servicer refused or ignored reconciliation requests when your revenues dropped, that conduct may be relevant to litigation.

Personal guarantee. Most Kapitus agreements require a personal guarantee from the principal owner. The guarantee exposes your personal assets -- not just the business -- to collection if the business defaults. Identify whether your agreement includes a personal guarantee and what its scope is.

ISO and broker involvement. If your deal was originated through a broker, the origination chain affects who represented what to you during the sales process. Misrepresentations made by a broker could be relevant, though the legal analysis is fact-specific.

Confession of judgment. Some older Kapitus-era agreements may have included COJ clauses. New York restricted COJ use against out-of-state defendants in August 2019. If a COJ was entered against you, the timing of your contract and your state of domicile matter.

Defenses Commonly Raised

MCA defendants raise several categories of arguments in litigation. Whether any apply to your case depends on your contract language and the specific facts. None of these should be treated as guarantees. An attorney experienced in MCA litigation needs to evaluate your situation.

Recharacterization. The core defense in many MCA cases is arguing that the agreement is functionally a loan, not a true purchase of receivables. If the agreement is recharacterized as a loan, usury laws may apply and could render the contract unenforceable. Courts look at whether the funder bore genuine risk of loss tied to business performance, whether repayment was guaranteed regardless of revenue, and whether reconciliation was real.

Reconciliation failure. If Kapitus or a servicer collected fixed daily ACH debits regardless of actual receivables, or refused to honor the reconciliation provision, the merchant may have a breach of contract or misrepresentation argument. Document all reconciliation requests you made and the responses you received.

Standing and assignment issues. If the plaintiff is a partner entity or assignee rather than Kapitus itself, the plaintiff must demonstrate proper standing. Review the complaint to understand exactly who is suing you and verify that the chain of ownership is documented.

Unconscionability. A small number of MCA defendants have raised unconscionability arguments, particularly where terms were presented on a take-it-or-leave-it basis and the effective cost of capital was extreme. This is a difficult standard to meet and has limited success in New York courts.

UCC and lien priority. Kapitus typically files a UCC-1 financing statement covering future receivables. The scope and validity of that filing, and its priority relative to other funders' filings, can be relevant -- particularly in a stacking situation.

For a detailed review of defenses, see our article on MCA lawsuit defense strategies.

How to Verify Your Specific Case

Confirm that the lawsuit is real, identify the named plaintiff, and locate the full docket before taking any action.

PACER (federal cases). Visit pacer.uscourts.gov. Search by party name under your business and your personal name. Federal cases in the Southern District of New York are fully searchable on PACER.

New York Unified Court System (state cases). Visit iapps.courts.state.ny.us/webcivilLocal/LCSearch for New York Civil Court. For Supreme Court filings, use the NYSCEF (New York State Courts Electronic Filing) system at iapps.courts.state.ny.us/nyscef.

Your home state courts. If you received a complaint but are not sure where it was filed, search your state's online court docket as well. Some partner funders in the Kapitus network are based in other states and may file locally.

Your attorney. A licensed MCA defense attorney can identify the case, assess the complaint's procedural sufficiency, advise on response deadlines, and evaluate whether the named plaintiff has proper standing. See our MCA lawsuit being-sued playbook for an overview of what to expect after service.

If you are evaluating your options between negotiation and litigation, our guide to the best MCA debt relief companies and responding to an MCA lawsuit complaint are both worth reading before you decide.