February 21, 2026 – By Christian Smith, Berkshire Financial Services
The three-factor test courts use to identify disguised loans has been applied, documented, and is now being cited across multiple jurisdictions. The Anadrill ruling is not an outlier. It is the most recent data point in a body of case law that has been building for years.
What the Three-Factor Test Actually Evaluates
Courts weigh three primary factors. Whether there is a meaningful reconciliation provision that actually adjusts payments when revenue changes. Whether the agreement has a finite, binding term. Whether the lender carries any real recourse if the merchant goes bankrupt.
The reconciliation provision is the most important of the three. A true purchase of future receivables fluctuates with actual revenue. If your payment is fixed regardless of what your business generates in a given week, the contract does not describe what is actually happening. A fixed payment collected on a fixed schedule is a loan payment. The label on the contract does not change that.
If the MCA provider is absolutely entitled to repayment under all circumstances, the transaction is a loan. Courts have held this consistently across multiple jurisdictions.
The Anadrill Ruling Applied the Test and Let the Claims Proceed
In re Anadrill Directional Services Inc. was decided in the United States Bankruptcy Court for the Southern District of Texas on January 28, 2026. The merchant received 650,000 dollars. The total repayment obligation was 1.016 million dollars. The court found the obligation lacked reasonably equivalent value and allowed usury and constructive fraudulent transfer claims to proceed.
The constructive fraudulent transfer claim is significant. Constructive fraudulent transfer means payments already made can potentially be recovered. The challenge is not limited to stopping future payments. It extends backward to what has already been extracted.
Two Days Ago, the New York Appellate Division Went Further
On February 19, 2026, the New York Appellate Division ruled in People v. Richmond Capital Group. The court affirmed a 77 million dollar judgment against MCA lenders on four grounds at once. The agreements were disguised loans. The lenders meant to charge illegal rates. The lenders committed fraud. And the contracts were unconscionable.
Unconscionable is a legal term. It means a deal was so one-sided that a court will not enforce it regardless of what was signed. That is the court’s word. Not ours.
The Richmond Capital court found the reconciliation provisions were a sham. Merchants asked for adjustments when revenue dropped. Lenders denied them. Payments stayed fixed. The court looked at what actually happened and called it a loan.
The court also held that prior MCA experience does not block a challenge. When a lender misrepresents what you are signing, what you knew before does not cure it.
What This Means for Contracts Already Signed
The contract you signed does not foreclose a legal challenge. It may be the evidence that enables one. The same language the lender used to circumvent lending laws is the language courts are now using to characterize the transaction as a loan subject to those laws.
Attorneys who understand how to use this framework work from the contract forward. The document you thought was working against you is often the first piece of evidence that works for you.
What This Means for Your File
Legal ground exists. The bankruptcy court used it. The appellate court used it. State legislatures are expanding it. But legal ground alone does not resolve a file. Using it requires the original agreements, an attorney who knows how to apply the framework, and a structured program that builds leverage from day one.
The window to act before your lender escalates is open right now. The ruling does not do the work. The structure does. Enrollment is what activates the structure.
To speak with a Berkshire Financial Services Finance Manager about your file, call 1-800-801-1019.
Informational purposes only. Not legal advice. Berkshire Financial Services is not a law firm. Results vary.