Exhibit 10.3

 
DEBT SUBORDINATION AGREEMENT

November 21, 2008

TO:         Textron Financial Corporation, as Agent
11575 Great Oak Way, Suite 210
Alpharetta, GA  30022
Facsimile:  (770) 360-1458
Attention: David McMichael, Esq.
 

The undersigned, ANCHOR FUNDING SERVICES, INC. ("Creditor"), is a creditor of
ANCHOR FUNDING SERVICES LLC ("Debtor").  In order to induce TEXTRON FINANCIAL
CORPORATION (the "Agent"), as Agent for itself and other financial institutions
(the "Lenders"), party from time to time to a Loan and Security Agreement (as
amended, modified or restated, the "Loan Agreement"), dated on or about the date
hereof, between Agent and Debtor, to extend or continue extending financial
accommodations to Debtor, Creditor hereby warrants, represents and agrees as
follows:

1.           As used herein, the term "Creditor Claims" shall mean indebtedness
in the amount of $5,664,000, owed by Debtor to Creditor, whether direct or
indirect, absolute or contingent, due or to become due, secured or unsecured,
legal or equitable; the term "Insolvency Proceeding" shall mean any action,
suit, proceeding or case commenced by or against Debtor under any chapter or
provision of the Bankruptcy Code or for the appointment of a receiver or other
custodian for Debtor or any of its property, or an assignment for the benefit of
creditors of Debtor; and the term "Obligations" shall mean all existing and
future indebtedness, liabilities and obligations which are or may from time to
time be owed by Debtor to Agent and Lenders under the Loan Agreement, including,
without limitation, all interest, fees and other charges payable in connection
therewith, in each case whether direct or indirect, absolute or contingent, due
or to become due, secured or unsecured or legal or equitable.  Whenever in this
Agreement reference herein is made to "payment in full" of the Obligations or
the Obligations being "paid in full," such reference shall be understood to mean
(i) the full and final payment of all of the Obligations, in cash, including,
without limitation, all interest, fees and other charges, whether or not any of
the same are recoverable or allowed as a claim in any Insolvency Proceeding, and
(ii) termination of any commitments that Agent and Lenders may have to Debtor
under the Loan Agreement to make any loans or otherwise extend credit to or for
the benefit of Debtor.

2.           Each instrument, if any, evidencing the Creditor Claims shall be
permanently marked with the following legend:

The within promissory note is subject to that certain Debt Subordination
Agreement executed by Anchor Funding Services, Inc. and Anchor Funding Services,
LLC on or about the 21st day of November, 2008, addressed to Textron Financial
Corporation, as Agent.

3.           Creditor hereby subordinates payment of all of the Creditor Claims
to the payment in full of all of the Obligations, as and to the extent set forth
in this Agreement.  Creditor shall not collect or receive any payments from
Debtor on account of the Creditor Claims (other than payments-in-kind) until
Debtor has paid in full all of the Obligations, unless otherwise expressly
permitted under the Loan Agreement.
 
 
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4.           Creditor shall hold in trust and immediately pay to Agent, in the
same form of payment received, any amount which Creditor receives in
contravention of paragraphs 3 or 6 of this Agreement.  If  in violation of this
Agreement Creditor commences, prosecutes, or participates in any suit, action,
or proceeding against Debtor, or attempts to enforce any security agreements,
trust deeds, lien instruments or other encumbrances, Debtor may interpose this
Agreement as a complete defense, and Agent at its option may intervene and
interpose this Agreement as an absolute defense in Creditor's name or in the
name of Debtor.

5.           Without Agent's prior written consent, Creditor shall not take any
action against Debtor or any of its property, including, without limitation,
filing any lawsuit or executing on any judgment, whether such action is by
legal, administrative or other proceedings, or by any other means; commence,
prosecute or participate in any action, suit or proceeding against Debtor or any
of its property, including, without limitation, any involuntary bankruptcy
proceeding against Debtor; or take any action to foreclose or realize upon any
collateral securing the Creditor Claims or to enforce any security agreements,
trust deeds, lien instruments or other encumbrances securing the Creditor
Claims.  Creditor subordinates any security interest, trust deed, deed to secure
debt, lien instruments and other encumbrances that Creditor may now or hereafter
have with respect to any existing or future property of Debtor to Agent's
interests in the same property.

6.           By its acceptance below, Debtor agrees that, until all of the
Obligations are paid in full, it shall not pay to Creditor any sum on account of
any of the Creditor Claims except as expressly permitted in paragraph 3 of this
Agreement or under the Loan Agreement.  Creditor and Debtor each warrants and
represents that there is no default in connection with any of the Creditor
Claims and that Creditor has not assigned any of the Creditor Claims to any
third party.

7.           With respect to the loans or other extensions of credit between
Agent, Lenders and Debtor, Agent or Lenders may grant extensions of the time for
payment or performance of any of the Obligations; otherwise modify any of the
terms and conditions of the Obligations or any agreement relating thereto; make
compromises and settlements with the Debtor and all other persons liable for the
Obligations; subordinate or release any lien on any property securing any of the
Obligations; and release any person liable for the payment of any of the
Obligations, in each case without notice to or the consent of Creditor.

8.           Agent and Lenders may at any time discontinue the extension of
credit to Debtor or may extend additional credit to Debtor, in each case without
notice to or the consent of Creditor.  This Agreement shall continue in full
force and effect until Debtor has paid in full all Obligations owing to Agent
and Lenders.

9.           If any payment or other distribution of property shall be made in
any Insolvency Proceeding involving Debtor, whether pursuant to liquidation of
assets or a plan of reorganization or composition, and such payment or property
shall be made to or received by Creditor, then Creditor shall promptly turn such
payment or property over to Agent for application to the Obligations until all
of such Obligations are paid in full.  If Creditor has any claim against Debtor
in any Insolvency Proceeding, Agent may file such claim on behalf of Creditor
and Creditor shall assign any such claim to Agent.  Any sums received by Agent
in connection with such claim shall be applied to the Obligations until all of
the Obligations are paid in full.

10.           This Agreement shall be binding upon the successors and assigns of
Creditor and Debtor and shall inure to the benefit of Agent's successors and
assigns; shall be governed as to validity, interpretation, enforcement and
effect by the internal laws of the State of Rhode Island; sets forth the entire
understanding of the parties with respect to the subject matter hereof; and
cannot be modified except by a writing signed by Agent.

11.           Creditor and Debtor each waives notice of acceptance of this
Agreement by Agent.

12.           If any party files an action to enforce or construe the provisions
of this Agreement, the prevailing party in the action shall be entitled to
recover from the other party all of its costs and reasonable attorneys' fees in
the action.
 
 
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IN WITNESS WHEREOF, Creditor and Debtor have executed this Agreement, this 21st
day of November, 2008.
 

 
ANCHOR FUNDING SERVICES, INC.
("Creditor")
         
 
By:
/s/        Brad Bernstein       President          

 
ANCHOR FUNDING SERVICES LLC
("Debtor")
         
 
By:
/s/        Brad Bernstein       President          

Accepted this ___ day of November, 2008:                  
TEXTRON FINANCIAL CORPORATION
("Agent")
                 
 
   
 
 
By:
   
 
 
Title 
   
 
 

 
 
 
 
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