- 1The Second Department reversed the lower court and granted Apollo summary judgment.
- 2The court found the deal was not a loan because payments adjusted to daily receipts.
- 3The merchant never invoked reconciliation, so its 'illusory' argument was foreclosed.
A New York appeals court has reversed a lower-court decision and sided with a merchant cash advance funder in a usury dispute. In Apollo Funding Co v Dave Reilly Construction, LLC, the Appellate Division, Second Department, held that the transaction was not a loan and that summary judgment should have gone to the plaintiff. The decision and order were issued September 24, 2025.
Background
Apollo purchased the future receivables of Dave Reilly Construction (DRC). DRC breached the agreement, and Apollo sued and moved for summary judgment. DRC defended by arguing the agreement was an unlawful, usurious loan, and on that basis the lower court denied Apollo's motion. The original case in New York Supreme Court was index number 035156/2023.
What the court found
On appeal, the Second Department found that Apollo had established that the agreement was not a loan. Three points drove the decision:
- The agreement provided for adjustments to DRC's daily payments based on changes to its daily receipts, so the amount of payments could change and the terms were not finite.
- Because DRC never used the agreement's reconciliation procedure, the court said it could not review the claim that the process was illusory.
- Nothing in the contract made a bankruptcy declaration an event of default.
The panel added that Apollo had otherwise made a prima facie showing of entitlement to judgment as a matter of law, and that the defendants failed to raise a triable issue of fact. The Supreme Court therefore should have granted summary judgment on the complaint.
Why it matters
The ruling tracks the factors New York courts weigh when sorting MCAs from loans: reconciliation, a finite term and bankruptcy recourse. It also shows that a merchant who skips the reconciliation process may have trouble later arguing that the clause was a sham.
Source reporting: deBanked.
