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Can a funder freeze your business bank account?
Generally not without a judgment first. Three other things get mistaken for a freeze, and two of them are more likely than the real one.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
Can a funder freeze my business bank account?
Generally not without going to court first. The usual route is default, lawsuit, judgment — or entry of a judgment on a confession of judgment where one was signed and is enforceable — and then a post-judgment order served on your bank, called a restraining notice in New York under CPLR 5222 and a garnishment or attachment elsewhere. Pre-judgment freezing is exceptional and requires a court order. Three other things are often mistaken for a freeze: continuing contractual debits, your bank's own decision to restrict an account, and a processor withholding card settlement.
The judgment route, in outline
A creditor with a money judgment can generally reach funds held for you by third parties, including banks. The procedure and its name vary by state: New York uses a restraining notice under CPLR 5222 and an execution under CPLR 5232; other states use writs of garnishment, attachment or execution under their own rules. The mechanics are broadly similar — the bank is served, it holds funds up to the amount specified, and the money is later turned over unless something stops it.
Getting to that point requires a judgment, which requires either a lawsuit that runs its course, a default judgment where a defendant does not respond, or entry of judgment on a confession where one exists and is available in that forum.
Pre-judgment attachment
Some states allow a creditor to seek attachment before judgment, but it is exceptional, requires a court order on a showing that meets a statutory standard, and often requires the creditor to post a bond. It is not something a funder does by sending an email.
What is more commonly happening
Work out which of the four is actually happening before deciding what to do, because the response differs completely.
How to tell which of the four you are looking at
Two minutes of looking at the account usually settles it.
If an account has actually been restrained
Deadlines here are short and they are set by court rules.
- Get the paperwork the bank received. It identifies the creditor, the court, the case number and the amount.
- Call a lawyer licensed in that state the same day. Procedures for challenging, claiming exemptions or seeking relief operate on timeframes measured in days.
- Deal with payroll separately and immediately — tell your lawyer that is the constraint, because it changes what they prioritise.
- Do not move money to defeat a valid order. Whatever the pressure, that creates a separate and worse problem.
Individual accounts may carry exemption protections for certain funds under state and federal rules; business accounts generally have fewer. Whether any exemption applies to you is a state-specific legal question.
The preventive point
Almost every version of this starts with a lawsuit you were served with. Responding to service, on time, is the single most effective thing available, and it is the step most often skipped.
Whether a second bank account helps
This gets asked constantly, and the honest answer has three parts.
A restraining notice or garnishment is served on a named bank. A creditor that does not know an account exists cannot serve it. That is the grain of truth.
Against it: a judgment creditor can generally conduct post-judgment discovery into your assets, which is a formal process with subpoena power behind it, and the funder already holds three to six months of your bank statements from underwriting. Transfers between your own accounts are visible in those statements.
And the part that matters most before a default: nearly every advance agreement lists changing, closing or diverting deposits away from the designated account as an event of default and as a covenant breach under the personal guarantee. Moving your deposits after a default notice is not a neutral act of housekeeping. It converts a guarantee that bites on conduct into a live claim, and it is the single most common way an owner turns a business dispute into a personal one.
The defensible version is structural and done early: a payroll account funded on a schedule from the operating account, set up while everything is current, disclosed where the agreement requires it. The indefensible version is the same movement performed the week after a demand letter.
What the paperwork tells you, and why you want it the same day
The document the bank received identifies the creditor, the court, the index or case number, the amount claimed and the date of entry. From those five items a lawyer can tell you whether the judgment was entered by default, whether it was entered on a confession, whether the venue matches the one named in your contract, and whether the clock for any challenge is still running. Without them, every conversation you have is guesswork.
Ask for it in writing, ask the same day, and send it to counsel before you call the creditor.
This is general information, not legal advice, and nothing here predicts what will happen in your case. Enforcement procedure is state law and the timing is unforgiving, so a lawyer licensed in your state is the person to call rather than to read about.
Where this applies
Related questions
Can a funder freeze my business bank account?
Generally not without going to court first. The usual route is default, lawsuit, judgment — or entry of a judgment on a confession of judgment where one was signed and is enforceable — and then a post-judgment order served on your bank, called a restraining notice in New York under CPLR 5222 and a garnishment or attachment elsewhere. Pre-judgment freezing is exceptional and requires a court order. Three other things are often mistaken for a freeze: continuing contractual debits, your bank's own decision to restrict an account, and a processor withholding card settlement.
Which funding products does this apply to?
Merchant Cash Advance, Working Capital, Term Loan. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.
Are the figures here quotes?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What a particular lender charges is on that lender's page, where it publishes it at all.
Who writes this?
The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.
How do I know a figure here is right?
Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.
Are the examples real deals?
No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.
Why do you never say what a typical rate is?
Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.
Is this financial or legal advice?
No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.
Can I reuse this content?
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