A clause where the business pre-agrees to a court judgment if it defaults. Several states restrict them; read whether your agreement contains one before signing.
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A confession of judgment (COJ) is a clause in which the business, and sometimes the guarantor, agrees in advance that the funder can obtain a court judgment if the business defaults, without a traditional lawsuit in which the business defends itself. Several states restrict their use, so understanding the clause before signing matters.
Amount to request
$85,000.00
Funding range$25K to $5M
*Sample amounts shown. Your actual offer depends on your business and is reviewed before approval.
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How it works: the borrower signs an affidavit or similar document admitting liability for a specified amount upon default. If the funder declares a default, it can file that document with a court to obtain a judgment quickly, which may then be used to freeze bank accounts or pursue collection. The business may have limited opportunity to dispute the default before the judgment is entered.
Why it matters: COJs have drawn scrutiny in commercial financing. In 2019, New York amended its law to bar the filing of confessions of judgment against defendants who do not reside in New York, after reporting on their use against out-of-state small businesses. Other states have their own rules, and federal legislation has been proposed. The legal landscape continues to evolve, so check current rules for your state.
What to look for: search the agreement for confession of judgment, affidavit of confession or similar language, and check whether it applies to the business, the guarantor or both. Read what counts as a default, because the COJ is triggered by that definition; vague default clauses combined with a COJ increase risk.
Questions to ask: Does this agreement include a COJ? Is it enforceable in my state? Can it be removed? What notice will I receive before any default is declared? A funder confident in its process should be able to answer clearly.
Consider alternatives. Many funding agreements do not include a COJ. If two offers are otherwise similar, the one without a COJ generally carries less legal risk for the business owner.
MFE provides written agreements so clauses like this can be reviewed, ideally with an attorney, before signing.
Here is an offer whose agreement you would review for a confession of judgment clause. Illustrative numbers.
| Amount funded | $125,000 |
| Factor rate | 1.40 |
| Total payback (amount × factor) | $175,000 |
| Fees deducted at funding (2%) | $2,500 |
| Net cash you receive | $122,500 |
| Weekly payment over 36 weeks | $4,861 |
| Same total as daily debits (~180 business days) | $972/day |
Illustrative numbers only. Your offer depends on your file; always compare net cash and total payback in writing.
| Does the agreement include one? | Search for COJ language |
| Who signs it? | Business, guarantor or both |
| Default definition | What triggers it |
| State law | Some states restrict use, e.g. New York for out-of-state defendants |
| Alternatives | Offers without a COJ |
Good fit:
Probably not yet:
A pre-signed agreement allowing a funder to obtain a judgment on default without a traditional lawsuit.
No, several states restrict them; New York bars filing against out-of-state defendants since 2019.
The business, the guarantor or both, depending on the agreement.
The agreement definition of default.
You can ask; some funders do not use them at all.
Yes, especially before signing an agreement that includes one.
Example uses for illustration only.
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