On July 25, 2025, a New York intermediate appellate court reversed a grant of summary judgment in plaintiff’s favor on its breach of contract and related breach of guaranty claims, concluding that while the agreement was a bona fide revenue purchase agreement rather than a criminally usurious loan, plaintiff failed to sustain its burden to be awarded summary judgment.
Under the parties’ contract, plaintiff Bridge Funding Cap LLC agreed to advance funds to several entities (the “entity defendants”) in exchange for 25% of the future revenues of the entity defendants’ business until an agreed-upon sum, referred to as the “purchase amount,” was paid to plaintiff. There was no interest rate, no payment schedule, and no deadline by which the entity defendants were required to pay the purchase amount to plaintiff and the contract expressly stated that the entity defendants were “not borrowing money from” plaintiff. The contract set forth a daily remittance amount of $3,500, which purportedly represented a “good faith estimate” of plaintiff’s future revenue share, as well as two reconciliation provisions to modify the daily remittance amount as necessary. Plaintiff further acknowledged that it had no recourse if the entity defendants went bankrupt, closed their business, or experienced a slowdown. An individual defendant personally guaranteed the entity defendants’ performance of the revenue purchase agreement.
On appeal from the Supreme Court’s grant of summary judgment in favor of plaintiff, defendants argued that the “revenue purchase agreement” was, in fact, a usurious loan. To determine whether the entity defendants’ repayment obligations under the contract were contingent (and therefore the contract is a revenue purchase agreement) or absolute (and therefore the contract is a loan), the majority opinion was guided by a three-factor test.
The first factor is whether the contract contains a reconciliation provision. That the contract at issue contained two reconciliation provisions weighed against a determination that the contract was a loan. The second factor is whether the agreement has a finite term. The contract at issue did not have a finite term or payment schedule, and indeed, the entity defendants’ payments could change as a result of the reconciliation provisions. The third factor is whether there is any recourse if the business declared bankruptcy. The plaintiff agreed that it executed the agreement “assum[ing] the risks” that the entity defendants’ business may fail and agreed that it had no recourse in the event of bankruptcy. Accordingly, the majority concluded that each factor weighed in favor of a finding that the contract was truly a revenue purchase agreement. However, the majority reversed the Supreme Court’s grant of summary judgment in favor of plaintiff, concluding that triable issues of fact remained regarding plaintiff’s damages.
Two judges concurred in the result but would not have applied the three-factor test employed by the majority. The concurring judges asserted that, under the majority’s test, the first two factors (the presence of a reconciliation provision and the presence of a finite term) were just “different sides of the same coin” because, without a valid reconciliation provision, the contract is necessarily for a finite term. The concurrence also argued that the third factor (whether there is recourse in the event of bankruptcy) could lead to the courts reaching the wrong conclusions if, for example, a valid guaranty was executed in connection with the contract.
Instead, the concurrence would apply the following two-part test: (1) whether the fixed-sum repayment amount represents a reasonable estimate of the prior or anticipated earnings of the party receiving the funds’ business rather than being “simply conjured from the void” and (2) whether a reconciliation provision is both present and not illusory. Applying this test, the concurrence concluded that the “estimate” of the entity defendants’ revenues did not appear to be reasonably related to their earnings and that factual issues remained whether the reconciliation provisions were illusory.
The case is Bridge Funding Cap LLC v. SimonExpress Pizza, LLC. Plaintiff is represented by Berkovitch & Bouskila PLLC. Defendants are represented by Amos Weinberg. The decision is available here.
