Earlier this month, Geddo Corp filed for Chapter 11 bankruptcy in California. The company operates 12 Farmer Boys restaurants, with 11 locations across California cities like Orange, Lodi, Corona, and Bakersfield, plus two more planned for Goodyear and Phoenix in Arizona. The franchise group is solidly mid-sized, the brand is well-respected, and from the outside, it looks like a healthy operation.

Inside the filing, the company disclosed that it had taken out 40 separate merchant cash advances totaling $5.2 million. In court documents, Geddo stated that “apart from a few reasonable MCA lenders, most greedily refused to cooperate and chose to strangle” the franchisee, and that collection efforts had “caused severe pressure” on cashflow that made it impossible to pay vendors and meet franchisor obligations.

Forty cash advances against one franchisee is a story worth understanding, because it isn’t unique to Geddo, and merchant cash advances are quietly reshaping how restaurants get financed, fail, and change hands.

What Is a Merchant Cash Advance

A merchant cash advance is not legally a loan, but a sale of future receipts. The funder buys a fixed dollar amount of the restaurant’s future sales at a discount, then collects on that purchase through daily or weekly automatic withdrawals from the operator’s bank account.

In a typical advance, a funder gives the operator $100,000 today and the operator owes back $135,000 regardless of how long the payback takes. The $35,000 markup is called a factor rate, expressed as 1.35. Factor rates in 2025 and 2026 commonly run from 1.2 to 1.5. There is no interest rate, no APR disclosure, and no traditional underwriting. The funder approves the advance based on three months of bank statements and a signature.

Because MCAs are legally classified as the sale of future receivables rather than loans, they sit outside most state usury caps and consumer lending rules. When you convert a typical factor rate into an effective annual percentage rate, the result commonly lands between 40 and 200 percent, with predatory cases running far higher.

How the Daily Withdrawals Work

After the advance funds, the funder begins pulling money out of the restaurant’s operating account every business day. Some MCAs take a fixed dollar amount regardless of sales, while others take a percentage of daily card receipts. The fixed-payment version is more common today, and it’s the more dangerous of the two, because the daily debit doesn’t shrink when revenue does.

Most MCA contracts include a reconciliation clause that supposedly lets the operator request a payment adjustment if business slows. Restructuring attorneys describe a consistent pattern in court filings, where funders ignore, delay, or refuse those requests. The clause exists on paper to protect the funder’s legal classification as a sale rather than a loan, not to protect the merchant.

Other features show up in the fine print. Confessions of judgment let the funder file a pre-signed affidavit with a court clerk and obtain a judgment without notice or a hearing, which can freeze the merchant’s bank accounts within days. New York banned this practice for out-of-state merchants in 2019, but it remains enforceable in many other jurisdictions. Funders also routinely file UCC-1 blanket liens against the restaurant’s business assets, which become visible to anyone running a UCC search and which can complicate any future sale of the business.

How Did They Get to Forty

Most restaurants that end up in MCA trouble do not start with 40 advances. They start with one, taken to plug a real cash gap such as a payroll Friday, a vendor shutoff, or an equipment failure. The daily debits start, the operator absorbs them, and within a few weeks the cash position is worse than it was before the advance came in.

So the operator takes a second MCA to cover the first, and then a third to cover the second. This is called stacking, and most contracts technically prohibit it, but funders compete aggressively to fund stacked deals because broker commissions are paid up front from the advance proceeds. Once stacking starts, the timeline from first MCA to bankruptcy commonly runs three to nine months. Geddo’s filing is the extreme end of that pattern in scale, not in kind.

The Regulatory Pushback

The most significant action to date came in January 2025, when the New York Attorney General secured a $1.065 billion judgment against Yellowstone Capital and a network of affiliated MCA funders. The settlement cancelled $534 million in debt for more than 18,000 small businesses across the country, ordered $16 million in restitution, and imposed lifetime industry bans on the principals. The attorney general’s office had alleged effective interest rates as high as 820 percent on some advances.

California and New York both now require commercial financing disclosures on MCAs, including stated APR, total repayment, and fees. The rules have been in effect since 2023, and while they are real progress, they are nowhere near sufficient to protect operators who are already in distress when the funder shows up.

What This Means for Restaurant Buyers and Sellers

This is the part that doesn’t get written about, and it’s where the Farmer Boys story matters most for anyone in the F&B brokerage market. MCAs don’t appear cleanly on a tax return because the daily ACH withdrawals get categorized as cost of sales, bank fees, or general operating expenses, depending on who is doing the books. The advance proceeds come in as deposits and inflate top-line cash. The principal sits on a balance sheet that most small restaurants don’t maintain in any usable form. A buyer running a standard SDE valuation can pay a fair multiple on a business that is, in reality, hemorrhaging cash to four different funders every morning at 9 a.m.

For buyers, the diligence checklist is straightforward, even if it is rarely run in full. The three steps below catch most active MCA exposure if a buyer actually applies them.

Pull a UCC-1 filing search at the secretary of state in every state where the business operates. Flag any filings from MCA funders or generic LLC names with addresses in New York or New Jersey, where most MCA originators are based.
Request 6 to 12 months of operating account bank statements and look for daily debits in round-dollar amounts to unfamiliar LLCs. Pattern recognition matters here. Same dollar amount, Monday through Friday, multiple counterparties.
Add an explicit representation and warranty to the purchase agreement stating that there are no outstanding merchant cash advances, revenue purchase agreements, or sales-based financing arrangements. Make the seller sign it.

For sellers, the lesson is harder to hear, because an MCA-laden restaurant is effectively unsellable at a fair valuation. Buyers who find one in diligence either walk or deeply discount. The cleanest path to a real exit is to retire any active MCAs well before listing, even at a discount payoff, and let the books breathe for a quarter or two before going to market.

The Quiet Story Inside the Filing

Forty cash advances is a big number, and Geddo is a big enough operator that the filing made the trade press. Most MCA-driven restaurant failures don’t make the news at all. They show up as quiet closures, vendor lawsuits, abandoned leases, and confused buyers wondering why a deal fell apart in due diligence.

The Farmer Boys filing is worth paying attention to not because it’s unusual, but because it’s visible. The same financing pattern is running through restaurants of every size in California right now. Anyone selling a restaurant, buying one, or financing one should understand how it works, what it looks like on a bank statement, and how to find it before it finds them.

Sources

Businesses Mentioned

Farmer Boys Geddo Corp Yellowstone Capital Delta Bridge Funding