National Funding Lawsuit: Defense Steps (2026)
Sued by National Funding? What the company is, contract terms, common defenses, typical filing venues, and how to verify the lawsuit on public records.
Key Takeaways
- National Funding is one of the oldest MCA funders in the country, founded in 1999 and headquartered in San Diego, California. It offers both MCAs and equipment financing.
- National Funding agreements may use California or New York governing law depending on the contract version. Verify your agreement's governing law clause to understand where suit is likely filed.
- Equipment financing and MCA agreements are legally distinct products. If your deal was equipment financing, different defenses and legal frameworks apply than for an MCA.
- Personal guarantees, factor rates, and holdback percentages are standard in National Funding MCA agreements.
- Recharacterization, reconciliation failure, and standing defenses are the primary arguments raised in MCA litigation, including cases involving National Funding.
- Verify your case on PACER, California courts, or New York courts depending on the governing law and venue clause in your agreement.
National Funding has been in the small business finance market longer than most. Founded in 1999 -- predating the modern MCA industry as most people know it -- the company has decades of experience originating and collecting on small business agreements. If they have filed suit against you, you are dealing with an organization that has substantial litigation experience and institutional knowledge of the collections process. This guide covers the essentials you need to understand before you respond or make any payment.
Who National Funding Is
National Funding was founded in 1999 and is headquartered in San Diego, California. It is one of the oldest independent small business finance companies in the United States, having operated through multiple economic cycles including the 2001 recession, the 2008 financial crisis, the COVID-19 disruption, and the subsequent inflationary period.
The company offers merchant cash advances and equipment financing to small and mid-sized businesses across a wide range of industries. Its equipment financing product funds purchases of commercial equipment -- vehicles, machinery, technology, and similar assets -- through leases and installment contracts. Its MCA product provides working capital advances repaid through holdback of daily receipts.
National Funding operates through both a direct sales force and an ISO (independent sales organization) broker network. If your deal was originated through a broker, the broker's representations during the sales process may be a relevant fact in any dispute, though the legal significance depends on your specific contract and state law.
As a California-based company that has operated for over two decades, National Funding has developed systematic collections and litigation processes. It files suits regularly and has in-house and outside collections counsel. A lawsuit from National Funding is not a negotiating tactic alone -- it is the beginning of a legal process with real deadlines.
Where National Funding Typically Files Suit
National Funding's San Diego headquarters and California domicile affect where litigation may be filed, though individual contracts can designate other governing law.
California state courts. Agreements with California governing law may be filed in California Superior Court. San Diego County is a natural venue given National Funding's headquarters. California courts have their own body of case law on MCA agreements, which differs from New York's.
New York state courts. If your agreement included a New York governing law and forum clause -- which some National Funding agreements have used -- the case may be filed in New York's Commercial Division or Civil Court. New York's Commercial Division is well-developed on MCA issues.
Federal court. Diversity jurisdiction cases (different states, over $75,000) may land in the U.S. District Court for the Southern District of California or other federal districts. All federal cases are searchable on PACER.
Your home state. National Funding may file locally if your state's courts are convenient, if local collection law is favorable, or if a forum clause permits it. Search both California and your home state dockets.
The difference between California and New York governing law is not trivial. California and New York have different usury statutes, different treatment of MCA agreements in their case law, and different procedural rules. Which state's law governs your agreement is one of the first questions your attorney needs to answer.
Common Contract Terms in National Funding Agreements
National Funding offers two distinct product types -- MCAs and equipment financing -- and the contract structure differs between them. If you are facing litigation, confirm which product type is at issue.
For MCA agreements:
Factor rate and purchased amount. Like all MCA funders, National Funding expresses the cost of capital as a factor rate. You receive an advance and agree to repay a larger purchased amount. The difference is National Funding's compensation, and the effective annualized cost can be high depending on how quickly the holdback recovers the purchased amount.
Holdback percentage. A daily percentage of receipts is remitted until the purchased amount is recovered. National Funding, like many funders, has used daily ACH collection rather than a dynamically variable holdback tied to actual same-day card volume. The structure of the collection mechanism matters for recharacterization analysis.
Reconciliation provision. Whether your agreement includes a genuine reconciliation clause, and whether it was honored, is critical. If you requested a holdback adjustment during a period of revenue decline and it was ignored or refused, document that.
Personal guarantee. Most National Funding MCA agreements require a personal guarantee from the business owner.
For equipment financing agreements: These are structurally different products, often structured as leases or installment sale contracts secured by the equipment itself. Defenses applicable to MCAs may not translate directly to equipment financing disputes. If your National Funding case involves equipment, your attorney needs to analyze it under a different legal framework.
Defenses Commonly Raised
Available defenses depend on whether your product was an MCA or equipment financing, which state's law governs, and the specific conduct of the parties. The following defenses are most relevant to MCA cases.
Recharacterization as a usurious loan. The foundational MCA defense is arguing that the agreement was a loan rather than a purchase of receivables. If a California court recharacterizes the agreement, California usury law may apply. California's usury statute caps rates at 10 percent per year for non-exempt lenders; however, there are significant exemptions, and whether a given MCA funder qualifies is a legal question. New York usury law and its application to MCA agreements follows a different analytical path.
Reconciliation failure. If National Funding collected fixed daily ACH debits without honoring reconciliation requests, that conduct may support a breach of contract argument.
Assignment and standing. If your account has been transferred to a collection entity or third-party holder, that entity must demonstrate proper standing and a clean chain of assignment.
Statute of limitations. Depending on the default date and the filing date, a statute of limitations defense may be available. California and New York have different limitations periods for commercial contracts.
Misrepresentation in origination. If a broker or National Funding representative made material misrepresentations about the product during origination -- for example, describing a fixed MCA as a loan or misrepresenting the effective cost -- those representations may be relevant to claims or defenses under state law.
For a comprehensive look at how these defenses work in practice, see our overview of MCA lawsuit defense strategies and the MCA attorney complete guide.
How to Verify Your Specific Case
Confirm the lawsuit is real, identify the correct plaintiff, and locate all filed documents before responding.
PACER (federal cases). Visit pacer.uscourts.gov. For National Funding cases, the Southern District of California and the Southern District of New York are the most likely federal districts, but search broadly by party name.
California state courts. California's Court Records system varies by county. For San Diego County, use the San Diego Superior Court's online portal. The California Courts website at www.courts.ca.gov has links to each county's system.
New York Unified Court System. If you believe the case was filed in New York, use iapps.courts.state.ny.us/webcivilLocal/LCSearch for Civil Court and the NYSCEF system for Supreme Court filings.
Your home state. Search your local state court docket as well, particularly if a collection entity (rather than National Funding itself) is pursuing the case.
Your attorney. A licensed attorney should locate and review the complaint before any response is filed. Our MCA lawsuit being-sued playbook explains what happens at each stage after service.
Sources
- PACER federal court records— U.S. Courts
- NY Unified Court System docket search— NY State Courts
- National Funding company website— National Funding
- CFPB Small Business Lending resources— CFPB
Before deciding between negotiation and litigation, review the best MCA debt relief companies and our guide on responding to an MCA lawsuit complaint.
Your next step
Lawsuits have deadlines. If you've been served, act in days not weeks. Here are the three paths, ordered by urgency for your situation.
- Talk to an MCA attorneyIf you've been served with a lawsuit or COJ, this is the first call. See what an MCA attorney does and what it costs.
- MCA debt relief companyIf no lawsuit has been filed yet, a debt relief company can often settle before litigation. Disclosure: /how-we-make-money.
- DIY negotiationWorks best before default. Full playbook here.