Stopping the debit or moving the account: what follows

Why it is treated so severely

The funder's whole position rests on the collection mechanism. Interfering with it is not a payment problem in the contract's eyes; it is interference with property it says it bought. So the drafting treats it as a distinct breach, separate from insufficient funds, and usually with no cure period.

Read your own agreement and you will typically find each of these listed separately: revoking the authorisation, placing a stop payment, blocking the debit at the bank, closing the designated account, changing banks without consent, and failing to deposit receipts into the designated account.

The sequence that usually follows

1. The debit is returned. Your bank charges a fee; the funder charges an NSF fee on top.
2. A notice of default issues, or in some drafting default occurs automatically without notice.
3. The unpaid purchased amount is accelerated in full, with default fees and enforcement costs added.
4. The personal guarantee is engaged, because interfering with the remittance is a listed covenant in most performance guarantees.
5. The funder acts on its security interest — which can include notifying your customers to pay it directly, and enforcing against the collateral described in its UCC filing.
6. If the pack included a confession of judgment and it can be entered in the relevant court, judgment can be entered and bank accounts restrained without a hearing.

Note step 6 in particular. Closing one account does not protect the others. Restraining notices go to whichever banks the funder can identify, and it has your statements.

What acceleration adds, in dollars

$58,000 plus $2,500 plus $78 is $60,578. Attorney fees at 25% add $15,144. The demand is $75,722 — about $17,700 more than the balance you were already struggling to pay, and that is before court costs, post-judgment interest, or anything your own bank charges.

That is the arithmetic behind "do not do this before taking advice". Stopping the debit does not pause the obligation. It enlarges it by roughly a third and moves it into a forum where you have fewer options and a deadline.

Does moving to a new bank help?

No, for three reasons. It is itself a default event in most agreements. The funder knows your customers and your processor, and the receipts are what it has a claim on, not the account number. And moving deposits after funding sits very close to what a validity guarantee is written to catch — diversion — which is the form of exposure that reaches you personally most directly.

What to do instead, in order

1. Tell servicing before the debit fails, in writing. A funder informed on Monday has options it does not have on Wednesday.
2. File a reconciliation request if the agreement has one, with statements attached and the arithmetic already done. This is the contractual route to a lower debit.
3. Ask for a specific accommodation: a reduced remittance for a defined period, a deferral, or a switch to weekly. Put a number on it that you can actually sustain.
4. Get advice before doing anything unilateral — a commercial litigation or restructuring lawyer in your state, with the agreement and the guarantee in front of them.
5. Get everything agreed in writing before you rely on it. A verbal accommodation from a servicing rep is not a variation of the contract.

How to tell the file is moving toward enforcement

The signals are consistent, and they tend to arrive in this order:

• Servicing stops offering accommodations and starts asking you to confirm information — bank details, current address, the names of your customers.
• Correspondence changes hands. A new email domain, a new signature block, a reference number that is not the one you had.
• A demand letter arrives with a cure date rather than a request.
• You are asked to sign something described as routine: an acknowledgement of balance, a revised guarantee, a stipulation of settlement. Each creates new obligations and can waive defences.

Any one of those is the point at which a lawyer stops being optional. The cure date in particular is not a formality; what you do inside it determines which remedies become available afterwards.

The customer notification, which people do not see coming

Where the funder has a perfected interest in your receivables, its remedies can include notifying your customers to pay it directly. That is neither a bluff nor unusual.

The commercial damage is often worse than the financial damage. A customer who receives a notice of assignment from a funder learns two things about your business in one letter, and some of them will quietly stop placing orders. If you are anywhere near this point, the conversation with your largest customers is one to have on your own terms, before somebody else has it for you.

If you have already stopped

Do not compound it. Do not open a new account and redirect customers. Get the agreement, the guarantee, any confession of judgment and your recent statements in front of a lawyer this week, and expect the conversation to be about resolving a default rather than avoiding one. It is a worse starting position than a week ago and it is far from the worst available.