If the agreement resembles a loan agreement, but it is not formally designated as such, and the merchants think the cost of capital is too high after taking the money I have found they then go to renegotiate the dollar amount to reduce the cost of capital. After negotiations to reduce the cost fail, they default or they choose the path of litigation

They primarily use 2 major offensive approaches to litigation

1) They sue for misrepresentation on the grounds that they thought they were getting a loan

2)They sue based on the theory that the agreement is, in fact, a loan agreement but is then usurious and therefore unlawful.

There are numerous cases in the court system and it always comes down to the language of the contract that was signed.., cases where merchants went to vacate the COJ based on these theories and others.

The cases came down to a few major things

If the contract states that it is not a loan and it is not ambiguous or misleading they cannot say that they were misled into thinking it was a loan. I've seen courts have dismissed the misrepresentation claim. In spite of this, they still let the case move forward based on Usury Claims under the Rico.t Racketeer Influenced and Corrupt Organizations Act.There are numerous other things that come into play in the contracts " reconciliation" " "renewal "evergreen" periods'

There is an "Unconciousabioity" theory in law also "disinterested malevolence" which then will come into play

Bottom line The courts have ruled that if an Advance or a working Capital Agreement Resembles a Loan agreement then it will be treated as such. No matter what it calls itself.