All businesses should strive to keep their working capital positive. Businesses, on the other hand, are frequently confronted with cash flow problems.
One of the variables to blame in these instances is often “exotic” short term hard money loans. Most often these loans charge usurious interest rates but the lenders “get away” with charging usury by claiming they purchased a portion of the businesses future receivables for a discounted lump sum.
This little nuance has meant that small businesses across America have been forced to pay millions upon millions of dollars in interest that far exceeds usury. The lenders call this transaction a Merchant Cash Advance or an MCA.
MCA’s are inherently atom bombs to any business. The repayments are most often required to be made DAILY and via ACH.
When a business has a Merchant Cash Advance or another form of an “exotic loan” it is often over leveraged and very soon unable to make the daily payments and soon it defaults on the MCA Agreement.
Defaulting on a Merchant Cash Advance can be devastating to the survival of the business and may bring six (6) possible outcomes.
- A lawsuit for breach of contract and unjust enrichment, i.e. getting rich illegally by taking the MCA but later defaulting on the Merchant Cash Advance.
- Pursuant to the Merchant Cash Advance Agreement, an MCA lender can file UCC restraining notices with the borrowers customers and accounts receivables and seek to have that money directed to it rather than the business.
- The funder may report your debt to the credit reporting agencies, both personally and against the business; and or
- Come after your personal assets and credit as a personal guarantor of the Merchant Cash Advance .
- Freeze or levy both business and personal bank accounts.
If a company is unable to recover receivables on time while continuing to pay daily or weekly ACH payments on its Merchant Cash Advance positions, it will run out of income very quickly.
This inevitably means fixed costs such as rent, electricity, payroll, and manufacturing will be hurt and negatively impact the business.
Businesses frequently seek short-term loans to stay afloat in order to ensure a steady cash flow to assure continuous operations.
Merchant Cash Advances, on the other hand, come with VERY hefty interest rates, require personal guarantees and some even have the requirement of a borrowing Merchant putting up PERSONAL collateral, to “protect” the MCA Funder from a Merchant default.
Often these “protections” are cumbersome, arbitrary and capricious and with a thorough analysis by an expert MCA attorney can bring Merchant Cash Advance Debt Relief. Excessive protections can be found to be indicia of a conventional recourse loan.
If your Merchant Cash Advance Attorney can successfully make such arguments the MCA will be found to be a loan instead and thus subject to usury laws.
Additional MCA Negatives:
Easy and rapid funding comes at a high cost. MCAs have been reported to have annual percentage rates as high as 850%.
MCAs are designed to ensure complete and absolute repayment, irrespective of circumstances and even if receivables have declined. While in such cases it is illegal to collect and pull ACH’s from the Merchant, the MCA Funders do it anyway.
The Merchant Cash Advance Funders may require small businesses to accept credit card payments exclusively and thus eliminate the possibility of the businesses to accept cash payments.
Also, opting for MCA Consolidation Lenders is, in effect, a band-aid treatment that should never be considered a long-term solution.
A business's growth will be harmed if it continues to pay out its revenues over a long period of time, which is not desirable for any business. These are some considerations that any company should make before deciding on an MCA.
Avoid being harassed by alleged Business Debt Consolidation Companies, and save your time and money in the long run by hiring a Merchant Cash Advance Debt Relief Attorney at Grant Phillips Law.
Is your business's cash flow being harmed by a Merchant Cash Advance (MCA)?
Grant Phillips Law, your Merchant Cash Advance Relief Attorneys can assist you.
Through settlement negotiations and litigation (when appropriate, for example if fraud was perpetrated upon the borrower) a Merchant Cash Advance Debt Relief Attorney at Grant Phillips Law can restructure your Merchant Cash Advance to make it more manageable or offer a decrease in the principal sum outstanding.
Merchant Cash Advance Relief Attorneys can help you reduce your assumed interest rates, daily or weekly payments, convert repayments from daily to fixed monthly payments without interest accruing.
RECLAIM YOUR RECEIVABLES
RECLAIM YOUR BUSINESS.
Grant Phillips Law, PLLC
516.670.5165
For more info:-
Merchant Cash Advance Attorney
Merchant Cash Advance Companies
Merchant Cash Advance Law Firms
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