April 6, 2026 – By Christian Smith, Berkshire Financial Services
The Supreme Court ruled the tariffs illegal in February. The government will refund the 166 billion dollars it collected without authority. The MCA debt small businesses took on to survive those same tariffs is still pulling from their accounts every week. The MCA lenders are under no such obligation.
That asymmetry is the story nobody is telling right now. The government takes back what it took illegally. The lenders who profited from the same crisis keep what they took. The question is whether that asymmetry holds up under scrutiny. The courts are starting to say it does not.
What the Supreme Court Actually Decided
On February 20, 2026, the Supreme Court ruled 6 to 3 that President Trump lacked the authority to impose sweeping tariffs under the International Emergency Economic Powers Act, known as IEEPA. Chief Justice Roberts wrote the majority opinion. The ruling was unambiguous: IEEPA does not authorize the president to impose tariffs. The tariffs that hit small businesses starting in April 2025 were ruled illegal.
Customs and Border Protection stopped collecting IEEPA duties on February 24, 2026. Approximately 166 billion dollars in tariff payments had been collected from over 330,000 importers across more than 53 million entries. Refunds are coming. The automated refund system is not expected to be operational until mid-to-late April 2026 at the earliest.
Within hours of the ruling, President Trump signed an executive order imposing a new 10 percent global tariff under Section 122 of the Trade Act of 1974. The tariff environment did not disappear. It shifted legal authority and lowered the rate. For businesses that had already taken on MCA debt to survive the original spike, that distinction is largely irrelevant. The debt was already done.
How the MCA Industry Found Its Latest Market
The pattern is not new. NPR documented it in February. One business owner, a Shark Tank winner running a grooming products company, saw his tariff bills stack to roughly 800,000 dollars in 2025, more than five times his normal import budget. He covered it with three MCAs totaling 950,000 dollars. With fees, his total debt exceeded 1.2 million dollars. His best revenue year on record. Every dollar consumed.
That story repeated across hundreds of thousands of small businesses. The tariffs hit on April 2, 2025. Banks did not move fast enough. MCA lenders moved the same day, offering hundreds of thousands within hours. Nine out of ten applicants get approved because the product is not underwritten for the borrower’s ability to sustain it. It is underwritten for the lender’s ability to extract from it.
The Refund Does Not Reach the MCA Debt
Here is what the refund process does not fix. The refund returns tariff duties paid. It does not return the factor rate charged on top of the MCA principal, the fees, or the months of daily drafts that pulled operating capital while the legal challenge worked its way through the courts.
The math runs like this. A business that paid 200,000 dollars in IEEPA tariffs during 2025 and covered that cost with an MCA at a 1.45 factor rate now owes 290,000 dollars to the lender. The refund returns close to 200,000 dollars in duties. The 90,000 dollars in MCA fees remains. The weekly drafts remain. The UCC-1 lien remains. The personal guarantee remains.
The government acted without authority and is being made to give back what it took. The MCA lenders profited from that same unauthorized action and are not being made to give back anything. That asymmetry exists because the contracts say it does. The question is whether the contracts hold up.
Is the MCA Debt Actually as Enforceable as the Lenders Insist?
The legal ground under MCA agreements is more contested than at any point in the industry’s history. The New York Appellate Division affirmed a 77 million dollar judgment against MCA lenders in February 2026 and called the contracts unconscionable. Unconscionable 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.
Courts are also applying a three-factor test to determine whether an MCA is a disguised loan rather than a purchase of future receivables. Does the payment actually adjust when revenue changes? Does the contract have a real end date? Does the lender bear any genuine risk if the business fails? In most MCA agreements, all three answers are no. Courts that apply the test reclassify the transaction as a loan subject to usury law.
The parallel matters. The Supreme Court struck down the tariffs because the executive branch acted without legal authority. The same scrutiny is now being applied to MCA contracts. The MCA industry asserts authority to collect under contracts that courts are increasingly finding were structured to evade the lending laws that should have applied. The legal foundation lenders rely on is no longer as solid as their pitch letters suggest.
Why the Window Matters Right Now
A business owner who took MCA positions to cover tariff costs in 2025 is now carrying debt built on a crisis the government created illegally, structured in a product a New York appellate court has called unconscionable, and still pulling from their account every week while refund paperwork works its way through the Court of International Trade.
The window for a controlled resolution is defined by one thing. Whether structure and legal oversight are installed before the lender decides the outcome. For businesses carrying tariff-driven MCA debt, that window is not abstract. It is measured in draft cycles.
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.