Recharacterisation
A court or regulator determining that a transaction structured as an advance was, in substance, a loan.
The consequence is that usury caps, licensing requirements and lending law apply retroactively. Features that attract the argument include fixed payments that do not flex with receipts, reconciliation that is unobtainable in practice, a finite term in substance, and collection conduct that reads as debt collection.
Why it matters to a broker
You do not write the contract, but you placed the file. Which funders you work with is the lever you actually control here.
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