- Business debt restructuring
- Debt free in as little as 3 months
- Payments reduced and terms modified
- Lawsuit defense services in multiple states
- Experienced Attorney representation
- Free phone consultations
- Millions in reduced debts secured by our lawyers
Struggling With Merchant Cash Advance Debt & Need a Merchant Cash Advance Attorney?
Do you have a merchant cash advance debt you are struggling to pay? Have you been sued for breach of contract by a merchant cash advance creditor? Were you recently served with a summons and legal complaint?
Possibly, you are not in default with your merchant cash advance but you may soon default for reasons outside of your control.
If you’ve received notice of threatened legal action from your lender, you may be questioning what is involved with a merchant cash advance lawsuit and what should you do?
Small business owners occasionally require additional operating capital to effectively run their businesses. You may need new equipment, additional inventory or maybe you just need to cover payroll during a turbulent time.
If a business owner does not qualify for traditional financing, a Merchant Cash Advance may seem like a reasonable or viable option to help the business.
Unfortunately, many small business owners enter into contractual agreements with one or more merchant cash advance lenders.
These business owners have the expectation that the lender will provide short term factoring receivable financing via the purchase and sale of the business’ future receivables to assist the business owner to meet the funding needs of the business between the intervals of its customer regular pay cycles.
However, what may have been characterized by the lender as a factoring relationship was instead, a grossly under-regulated predatory commercial lending product.
Eventually, with repayment terms requiring weekly or daily payments (with the lender having full access to your company bank accounts), the repayment requirements become impossible to maintain and still have the cash flow needed to run your business.
The money may come quickly but what small business owners do not realize is that they may be setting themselves up for potential bankruptcy.
If you’ve taken an advance from a merchant cash advance lender and are now struggling to stay timely with payments or are already in default, you need an experienced merchant cash advance attorney in your corner.
How Do MCAs Work?
With a typical merchant cash advance, lenders and borrowers agree to a daily or weekly payback schedule.
In return, the lender receives a percentage of sales or receipts from the borrowers.
You would assume that if your business is slow, the daily and weekly payments would go down to reflect the current reduced revenue of the business.
Unfortunately, this is not how the system works. Most lenders have a fixed amount that they continue to draw from the business bank accounts whether revenue is at a normal level or not.
As part of the application process, a lender will generally require a business operator to provide merchant payment processing statements and bank statements to determine how much of an advance can be funded. Occasionally, a credit check may also be required in order to qualify.
If approved, the lender will provide the terms and conditions of the advance. The funds are then deposited into the business owner’s bank account for their use. The payments are scheduled to be paid back in a specified time frame with repayment beginning immediately.
Often, business owners may get in over their heads with these types of loans and may require the assistance of a Merchant Cash Advance experienced lawyer to help them in regaining day to day control of their business enterprise and their cash flow.
MCA lenders are quick to bring lawsuits against borrowers who default on payments, so it is important to seek legal counsel immediately if you have defaulted or believe you may soon default on a scheduled payment.
What Is the Difference Between an MCA and a Loan?
A merchant cash advance (MCA) isn’t technically a loan, but rather a cash advance based upon the future receivables a business will collect.
The process to obtain the advance is a fairly quick process and it is most often not a credit driven approval.
Merchant cash advance companies look at the daily gross receipts to determine if the business is capable of paying back the funds in a timely manner. Profit margins are not taken into consideration by the lenders.
This type of agreement eliminates the need for collateral that would normally be required for a traditional commercial loan. The total amount to be repaid is calculated by a “factor rate” which is a multiplier generally based on the business’s financial status / average revenues.
The MCA company decides how high the factor rate will be based on:
- Reviewing bank statements which will show the number of monthly deposits,
- How much those deposits were for,
- How many days they did not receive any deposits, and
- How many other advances the merchant may have.
The MCA company also looks at how long the merchant has been in business for and what industry they are in.
The higher the risk, the higher the factor rate.
Can You Default on a Merchant Cash Advance?
Yes, but defaulting on a Merchant Cash Advance could be extremely detrimental to the business and most likely will result in:
- Lawsuits being filed by the lender,
- Possible judgments (if not properly defended in a court of law), and
- UCC liens recorded by the lender.
As a result, you may see aloss of customers and the freezing electronic payment processing accounts.
In other words, defaulting on an advance without proper planning could quickly put you out of business.
You may think that you can then pay this loan off with the next job, sale or receivable that comes in, but this is not always a reliable or a realistic solution.
Attempting to restructure or settle business debt can be very stressful and challenging for many borrowers.
The Business Debt Law Group can help make arrangements with creditors to ensure that you are able to continue operating. Your main goal as a borrower is to avoid filing for bankruptcy and/or avoid closing down your business.
The History and Harms of MCAs
Many people think that the aftermath of the financial crisis in 2008 is when merchant cash advances came to rise, but that is incorrect.
In 1998 a company called AdvanceMe (now called CAN Capital) pioneered the splitting of credit cards. AdvanceMe was monopolizing the merchant cash advance industry because they owned the patent on split-funding (known today as merchant cash advance).
Initially merchant cash advances were byproducts to selling credit card processing point of sale systems. Right before the financial crisis when the split-finding patent was invalidated, companies began to focus solely on funding advances.
When the economy took a downturn in 2008, it was one of the only sources to get funding for your business and this opened the floodgates.
Merchant cash advances are now estimated to generate $5 billion to $10 billion in advances each year and growing.
Regulation of Merchant Cash Advances
Unfortunately, there is little merchant cash advance regulation.
MCAs are not considered a loan and there is no federal oversight of the advances. They do not fall under any state Usury laws.
MCA’s have been known to carry annual percentage rates – the total cost of a loan, including all fees – sometimes over 300%.
Many would claim these advances fall under the definition of predatory lending. However, there are no laws to that effect. Only certain conduct by the lender could possibly permit a court to consider a merchant cash advance to be predatory in nature or an illegal usurious loan.
Our experienced legal team knows the conduct to look for in order to raise these defenses for our clients.
Additional Risks of an MCA Loan
Once you have one merchant cash advance, you should expect to receive more phone calls from brokers trying to get you to take out additional advances.
This process is called stacking. Many other MCA funders may contact you to try to get you to add new advances on top of your existing advance, in a gambit to allegedly get out of debt.
Information about your business becomes public record after a lien has been placed against you. This information is then compiled and sold to other MCA funders who will try to get you to stack your advances which will, in most cases, only place your livelihood at greater risk and further in debt.
Confession of Judgment
Did you sign a confession of judgment when you received your advance?
You may have been required to sign a confession of judgment document when you executed your MCA paperwork. This is a common practice with lenders that draft their MCA agreements based upon Texas, Pennsylvania, Connecticut and Utah law. It also applies to the State of New York but only if the business is domiciled in New York.
A confession of judgment takes away your right to defend yourself before a judge if you default or stop paying your merchant cash advance.
You are agreeing to let a judgment be entered against you without notice and you allow the MCA company to skip the normal court proceedings that would be required to file a judgment.
What Can an MCA Attorney Do for You?
Your merchant cash advance attorneys may be able to:
- Reduce and restructure your payments
- Insulate you from liability
- Aggressively defend lawsuits in multiple jurisdictions
- Avoid potential judgments or satisfy existing judgments
- Provide you and your business immediate relief.
You need an experienced lawyer to help you regain control of your cash flow in order that you can best run your business as you see fit.
Hiring a qualified and experienced merchant cash advance law firm before your debt problems grow worse will ultimately save you from a potential future bankruptcy or business closure.
There are dozens of merchant cash advance lenders ready to give you cash while putting you in an unsustainable repayment schedule.
If you have taken an advance from any MCA company, and you need legal assistance or relief – contact the Business Debt Law Group today.
Free Debt Relief Consultation With the Business Debt Law Group
We understand the stressful time you may be going through.
Our firm and its lawyers will guide you through the entire process. With more than 60 years combined experience within our senior team of lawyers, we are very well prepared to handle your case.
If you are experiencing merchant cash advance legal issues, if you’ve had a merchant cash advance breach of contract suit filed or if you need help with an MCA restructure – call us today.
Following an initial free consultation, one of our firm’s attorneys will review your merchant cash advance or business loan agreements and share their findings and initial legal advice with you.
You may be surprised to learn of your extremely high actual interest rate, costs and fees. Our firm has seen interest rates greater than 300% per annum.
We will be able to tell you what your options are as well as answer any questions you may have regarding the differences between a MCA consolidation vs MCA attorney.
Once our initial review is complete and you have elected to retain our firm, your assigned legal counsel will begin to work with your lenders to secure a method and pathway to get you out of the vicious cycle you are presently in and most importantly, help to get you back control of your business and its cash flow.
There is never a cost to speak with us and all attorney consultations are always complimentary.
You deserve to know what options you have available to you. Call us today to review your business’s hardship or pending lawsuit.
We understand this is a confusing and stressful time for you. Let us take the burden off of your shoulders. Before you have any bank accounts frozen or garnished, UCC liens filed against merchant processors/vendors, or you have a lawsuit filed against, contact us for a free consultation with an experienced business debt attorney. We are here to help you.
