New Mexico Merchant Cash Advance Attorney: A Helpful Guide for Business Owners
Merchant cash advances (MCAs) have become an increasingly popular form of alternative financing for small businesses in New Mexico and across the country. Unlike traditional bank loans, MCAs provide fast access to capital by advancing a lump sum of cash in exchange for a percentage of future credit card sales.However, MCAs also come with some major drawbacks that New Mexico business owners should be aware of. The high fees, daily repayment structure, and lack of regulation can make MCAs an expensive and even predatory form of financing.This article provides an overview of MCAs in New Mexico, discusses the pros and cons of these financing arrangements, and explains why it’s crucial to work with an experienced New Mexico MCA attorney when obtaining or dealing with a merchant cash advance.
Overview of Merchant Cash Advances in New Mexico
New Mexico has a vibrant community of over 120,000 small businesses across the state
-. Many of these businesses rely on access to financing to operate and grow. However, since small and new businesses often don’t qualify for bank loans, MCAs have become an increasingly popular financing option.There are now dozens of MCA companies targeting New Mexico businesses with promises of quick and easy access to capital. Some of the major players in New Mexico include AmeriMerchant, Kapitus, Pearl Capital, and Yellowstone Capital
.While MCAs fill a need, complaints have also grown in New Mexico about predatory lending practices. Business owners report being misled about repayment terms and getting trapped in debt cycles. A lack of regulation also enables MCA companies to charge excessively high fees and rates.
Pros and Cons of Merchant Cash Advances
MCAs provide some benefits but also major drawbacks that New Mexico businesses should carefully weigh:
Pros
- Quick funding – MCAs can provide funding in as little as 24-48 hours, which is much faster than traditional loans
3
. This appeals to businesses with immediate capital needs.
- Flexible qualifications – Approval is based more on credit card sales than credit scores or business assets. This helps newer or distressed businesses qualify
4
.
- Predictable payments – Some MCAs have fixed daily or weekly payments, allowing businesses to forecast cash flow.
Cons
- Very high cost – MCA fees often equate to APRs over 100%, making them a very expensive financing option
5
.
- Repayment risk – Deducting a percentage of credit card sales leaves businesses vulnerable if processing is disrupted.
- Confusing terms – Vague contract language and lack of transparency about total costs make it hard for business owners to understand what they’re agreeing to.
- Aggressive collections – Some MCA providers use aggressive tactics like filing confessions of judgement to collect on defaults.
Why Work with a New Mexico MCA Attorney
Given the drawbacks of MCAs, it’s highly advisable for New Mexico business owners to work with an attorney when obtaining or dealing with a merchant cash advance. An attorney can provide valuable assistance such as:
-- Reviewing the MCA agreement – They can analyze the contract terms to spot unfavorable clauses and explain your rights and obligations under the agreement before signing. This improves your negotiating leverage.
- Negotiating better terms – The attorney can negotiate with the MCA provider to remove or alter predatory terms in the contract that negatively impact the business.
- Navigating defaults or disputes – If issues arise with repayment or collections, the attorney can represent you in dealing with the MCA company to reach a reasonable settlement.
- Advising on defenses – They can raise defenses on your behalf if the MCA company files a lawsuit over non-payment, such as arguing the agreement violates state laws.
- Avoiding scams – Unfortunately, some MCA providers in New Mexico are outright scammers. An attorney can help thoroughly vet MCA companies to avoid being defrauded.
Having experienced legal counsel on your side levels the playing field when dealing with MCAs and provides critical protection.
New Mexico Laws and Regulations on MCAs
While New Mexico has not passed MCA-specific legislation yet, some laws and protections still apply:
- Usury laws – MCA agreements with excessive fees may be in violation of the state’s usury laws capping interest rates. Usury challenges have succeeded in some cases.
- Deceptive practices protections – New Mexico’s Unfair Practices Act prohibits misleading or deceptive conduct by lenders. This offers recourse if an MCA company engages in predatory marketing, sales tactics, or contract terms.
- Confessions of judgement – Stricter requirements enacted in 2015 help protect business owners from improper use of confessions of judgement by MCA lenders.
- Recent federal scrutiny – Federal regulators like the FTC and CFPB have started cracking down on abuses in the MCA industry, which could lead to tighter oversight ahead.
While New Mexico lacks MCA-specific regulations currently, working with an attorney can help ensure you receive maximum protections under existing laws.
Finding the Right New Mexico MCA Attorney
If you’re considering a merchant cash advance or are already obligated to one, finding the right legal counsel is crucial. Look for an attorney with specific experience dealing with MCA companies and cases. Key credentials to seek out include:
- Knowledge of MCA laws and regulations – They should have an in-depth understanding of state and federal laws and regulations that apply to MCAs.
- Experience negotiating MCA contracts – Look for experience successfully negotiating MCA agreements on behalf of clients to improve terms.
- Litigation record against MCA companies – For attorneys proficient in raising defenses and winning MCA cases in court if a dispute arises.
- Industry connections – Well-connected attorneys may be able to access MCA company executives to negotiate resolutions for clients.
- Reasonable fee structure – Given MCA issues often arise from cash flow problems, seek out attorneys with flexible or contingency fee arrangements.
Vet any attorney thoroughly before retaining them. Be sure to understand their qualifications, strategy for your case, and what their fees will be.
-