Merchant Cash Advance Attorney – What You Need to Know
Hey there! If you’re reading this, chances are you’ve taken out a merchant cash advance (MCA) for your business and are now looking for some help dealing with it. I feel you. As a small business owner myself, I know how tough and confusing these MCAs can be.That’s why I wanted to write this article – to give you the real scoop on merchant cash advances in simple terms and let you know your options if you need legal help. I’m not a lawyer, but I’ve talked to a bunch of attorneys about this stuff and want to pass on what I’ve learned.
What is a Merchant Cash Advance Anyway?
First things first – what the heck is a merchant cash advance? Here’s the basics:
-- It’s where a company gives you an upfront lump sum of cash in exchange for a percentage of your future credit card sales.
- The money isn’t a “loan” but rather the company “purchases” your future receivables.
- You pay back the advance by letting the company take a cut of your daily credit card revenue – usually 10-20%.
- There’s no fixed monthly payment. Your payback fluctuates based on your sales volume.
So in a nutshell, MCAs give you quick cash without having to qualify for a bank loan. The catch is you give up a chunk of your ongoing sales until it’s paid back.
The Good and Bad of Merchant Cash Advances
MCAs can be a quick fix when you need money fast. But there’s also some big downsides you need to look out for:Pros:
- Fast funding – you can get cash in your account in as little as 24-48 hours in some cases. Sweet!
- Flexible qualifying – MCAs don’t check your credit or business history like a bank loan. If you need money quick, they’re less strict.
- Payments follow revenue – Your payback goes up and down based on sales volume. So if business is slow, you pay less.
Cons:
- Crazy high costs – MCA companies charge the equivalent of 60-400% APR in fees and interest when you calculate the true cost! Yikes!
- Daily payments – Having payments come out daily can drain your cash flow and makes it harder to budget. Not cool.
- Aggressive collections – MCAs are quick to slap you with fees and penalties if you fall behind. And they may raid your bank accounts.
- Confusing terms – MCA contracts use fancy legal jargon that makes it hard to understand what you’re agreeing to. Shady!
- Reliance on credit cards – If your processing gets disrupted, you have no revenue to pay them back with. Risky!
So in summary – MCAs give you fast cash but can rack up huge hidden costs quickly. And you risk your business if sales drop.
-Do Merchant Cash Advances Break the Law?
Here’s where things get tricky. Because MCA companies say it’s not a “loan,” they don’t have to follow state lending and interest rate laws.But more and more, judges are ruling these are in fact super high-interest loans in disguise. Some key legal issues:
- Usury violations – MCA fees/rates often exceed state interest rate limits. If ruled a loan, that’s illegal usury.
- Deceptive marketing – MCA companies downplay the true costs and risks of their product. That’s dishonest.
- Unfair terms – Stuff like accessing bank accounts, daily payments, and vague contract language is often deemed unfair.
So in many cases, MCAs are crossing legal lines. And attorneys have been successful challenging them in court in certain states like New York and California.This is still a gray area of law. But rulings are trending toward better protecting business owners from predatory MCAs.
Beware “Debt Relief” Scams
If you’re struggling to pay back an MCA, you may get calls from companies promising to “settle your debt” or “consolidate loans.” Beware – many of these are scams!Here are some red flags to watch out for:
- Asking for upfront fees before settling any debts. Big no no!
- Promising to erase or eliminate your MCA debt completely. Usually bogus!
- Not having an actual lawyer on staff. Huge warning sign!
- Telling you to stop paying the MCA company. This can make things worse!
Legitimate debt relief services will clearly explain their fees, have attorneys on staff, and take time to review your full situation before making any promises.If something sounds too good to be true, it probably is. Protect yourself and your business!
When to Call a Merchant Cash Advance Attorney
If you’re overwhelmed by an MCA and need legal firepower, here are some good times to contact an attorney:
-- You’re considering an MCA – Have an attorney review the terms BEFORE you sign anything. They can try to negotiate better rates and conditions or warn you of red flags.
- You can’t keep up with payments – An attorney can help work out new payment arrangements or settlement offers if you default. Don’t wait until you receive threats of lawsuits.
- You’re sued by the MCA company – Attorneys can defend you in court if the MCA sues you for breach of contract. They know how to fight back!
- An MCA misleads or defrauds you – If you believe the MCA engaged in deception or predatory actions, an attorney can build a case to invalidate the agreement.
- You need debt restructuring – Attorneys can negotiate deals to reduce what you owe and create affordable payment plans. Don’t lose hope!
The earlier you involve an attorney, the more options you’ll have. Don’t let an MCA bully you or damage your business!
What Can an MCA Attorney Do For You?
The right attorney can be a total game changer in dealing with MCA headaches. Here are some of the ways they can help:
- Negotiate better contract terms – Attorneys can try to get improved terms before you sign. This puts you in a stronger legal position.
- Explain your rights – They’ll educate you on consumer protections you have under state laws regarding interest rates, debt collection, and unfair practices. Knowledge is power!
- Defend you in lawsuits – Attorneys have the expertise to represent you in court if the MCA company sues you over the agreement.
- Settle disputes – They can negotiate settlements or debt reductions if you default or want to end the agreement early.
- Void illegal contracts – If the MCA violates lending laws, attorneys may get the agreement thrown out completely. What a relief!
- Stop harassment – Attorneys can force MCA companies to cease unlawful collection tactics like calling excessively or improperly accessing your accounts.
Having an experienced attorney on your team levels the playing field and gives you a huge advantage when dealing with shady MCA tactics. Don’t go it alone!
-Finding the Right MCA Attorney
Not all attorneys are created equal when it comes to battling merchant cash advances. Here are some tips on finding the right one:
- Look for lawyers who specialize in MCA cases – This is a niche area of law so you want someone focused on these types of agreements.
- Find an attorney licensed in your state – State laws vary, so local expertise is key. Plus an in-state lawyer can better represent you in court.
- Search for good online reviews – Check sites like Google, Yelp, etc. to make sure past clients have been happy with the attorney’s services.
- Ask about case experience – How many MCA cases have they handled? How often do they fight these companies in court? Look for a seasoned pro.
- Inquire about typical fees – Get fee estimates in writing. MCA attorneys often work on contingency or offer flat rates. Know the costs.
- Meet your prospective lawyer – Make sure you’re comfortable with them and feel they truly have your back. Trust your gut!
Take your time finding the ideal attorney. Having the right legal muscle on your side can help you regain control of your finances and your business.You’ve got this! Don’t let shady MCA companies push you around or drain your hard-earned revenue. Call a qualified MCA lawyer today and start leveling the playing field. I’m rooting for you!