Merchant Cash Advance Attorney South Dakota
Merchant cash advances have become an increasingly popular form of business financing in recent years. Unlike traditional bank loans, merchant cash advances provide businesses with quick access to capital based on a percentage of their future credit card and debit card sales. While merchant cash advances can provide much-needed working capital, some businesses have found themselves struggling to keep up with the high repayment rates. In some cases, predatory lending practices have led businesses into financial ruin. If you are a South Dakota business owner who has concerns about your merchant cash advance agreement, contacting an experienced attorney can help you understand your rights and explore your options.
-How Merchant Cash Advances Work
A merchant cash advance is a form of financing in which a company purchases a portion of a business’s future credit card receivables at a discount. For example, a merchant cash advance company may provide a business with $100,000 in capital in exchange for 15% of the business’s credit card sales until $150,000 is repaid. The merchant cash advance company then collects a fixed percentage of the business’s daily credit card receipts via automatic withdrawals from the business’s merchant account. Repayment terms are usually between 4-12 months.[1]
Unlike a term loan, there is no fixed repayment schedule with a merchant cash advance. The business simply repays the advance when credit card sales come in. This flexibility can be beneficial for businesses with irregular cash flow. However, it also means the total repayment amount can vary widely depending on the business’s sales volume. Businesses can end up paying back far more than they anticipated if sales are low.
Common Legal Issues with Merchant Cash Advances
While merchant cash advances provide easy access to capital, they also come with some significant legal risks that business owners should be aware of. Some common legal issues include:
- Excessively high interest rates – Some merchant cash advance companies charge interest rates over 100%, which may be illegal under state usury laws.
- Deceptive marketing practices – Companies may misrepresent repayment terms, total costs, or eligibility requirements.
- Aggressive collection tactics – Businesses have complained of daily withdrawal attempts that overdraw bank accounts, harassing phone calls, and threats of legal action.
- Lack of transparency – Statements often lack clear information about balances owed, payments made, fees charged, etc.
- Personal guarantees – Owners may be personally liable if the business defaults.
- Onerous contract terms – Some agreements contain provisions that are overly one-sided or restrict businesses’ rights.
These issues have prompted a number of lawsuits against merchant cash advance companies as well as calls for increased regulation. New York recently enacted a law capping interest rates and requiring more transparent contracts.[2] However, oversight remains limited in most states, including South Dakota.
-Defenses Against Merchant Cash Advance Lawsuits
If you are facing legal action from a merchant cash advance company, an attorney can help you understand and assert possible defenses. Here are some potential defenses to explore:
- Unconscionability – Argue that the agreement is so unfair and one-sided that it should not be enforceable under the law.
- Usury – Claim that the interest rate exceeds state limits on what lenders can legally charge.
- Deceptive practices – Allege that the company misled you about key terms and costs.
- Breach of contract – Claim the company did not fulfill its contractual obligations, such as only withdrawing agreed-upon percentages.
- Duress – Argue you were under unfair pressure or coercion when signing the agreement.
- Inaccurate statements – Dispute the stated balances, payments, fees, etc. if records are unclear.
An attorney can assess the specific facts of your case and determine which defenses may apply. They can also negotiate a settlement or payment plan if needed.
Finding a Merchant Cash Advance Attorney in South Dakota
If you need legal help with a merchant cash advance in South Dakota, look for an attorney experienced in commercial litigation and financial services law. Be sure to ask about their specific experience with merchant cash advance cases. It may also help to find an attorney located near you who is familiar with the local courts and legal environment. Here are some tips for finding a qualified merchant cash advance attorney in South Dakota:
- Search state and local bar association directories for commercial litigation attorneys.
- Look for lawyer directories and reviews online to research attorneys’ backgrounds and experience.
- Ask other local business owners for referrals.
- Contact consumer advocacy groups for recommendations.
- Schedule consultations with a few attorneys to discuss your case specifics.
- Consider attorneys who offer free initial consultations and flexible fee arrangements.
- Check whether the attorney is licensed and in good standing with the state bar association.
- Choose an attorney you feel comfortable with and who understands your objectives.
Having experienced legal counsel can help South Dakota businesses maximize their chances of a favorable outcome when dealing with merchant cash advance disputes. Be sure to act quickly if you are facing litigation so your attorney has time to build the strongest case possible on your behalf.
References
[1] https://grantphillipslaw.com/merchant-cash-advance-attorney-south-dakota/
-[2] https://www.law.com/dailybusinessreview/2022/09/07/im-ruined-litigation-trend-takes-aim-at-merchant-cash-advance-industry/