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Alabama Merchant Cash Advance Attorney: A Helpful Guide for Small Businesses

Merchant cash advances have become an increasingly popular form of financing for small businesses in Alabama. Unlike traditional bank loans, merchant cash advances provide fast access to capital without requiring strong credit, collateral or a lengthy application process.But merchant cash advances also come with some major drawbacks that Alabama business owners need to watch out for. Excessive fees, high equivalent interest rates, aggressive collections tactics and other issues can put companies in a debt spiral.That’s why working with an experienced Alabama merchant cash advance attorney is so important for small businesses in the state. This article provides a helpful overview of how merchant cash advances work, problems that can arise, relevant Alabama laws, and legal defenses and strategies that attorneys can use to help business owners.

How Do Merchant Cash Advances Work in Alabama?

First, it’s important to understand what a merchant cash advance is and how the financing works:

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  • A merchant cash advance provider gives a business an upfront lump sum, usually between $5,000 – $500,000.
  • In exchange, the business agrees to repay the advance through daily payments taken as a percentage of their credit card sales, generally 10-20%.
  • The daily payments continue until the full amount is repaid plus fees and interest, equaling a high APR of 60-300%.
  • The cash advance company takes the payments directly from the business’s credit card receivables account through daily debits.
  • There is no fixed repayment term – the business repays as quickly or slowly as their credit card sales volume allows.

This quick and easy financing may seem appealing. But merchant cash advances can also become extremely expensive for small businesses in Alabama.

Problems With Merchant Cash Advances in Alabama

While merchant cash advances provide fast funding that’s accessible for companies with poor credit, several problematic issues can arise:

  • High costs – The fees, rates and daily repayment structure can make the total cost of a merchant cash advance equivalent to an APR of 60% to as high as 300%, much more than a traditional loan.
  • Repayment challenges – If the business has an irregular or declining cash flow, keeping up with the daily payments can be difficult and put the company at risk of default.
  • Aggressive collections – Merchant cash advance providers are known to aggressively pursue repayments, including filing lawsuits against the business and its owner.
  • Personal liability – Business owners often have to personally guarantee the advance, putting their personal assets at risk if the company defaults.
  • Opaque terms – Agreements contain confusing terminology and lack transparency about the true costs.

With so many pitfalls, Alabama small businesses can easily get trapped in a cycle of merchant cash advance debt. But the right attorney can help avoid or address these problems.

Alabama Laws Related to Merchant Cash Advances

There are several Alabama statutes related to lending and debt collection practices that may apply to merchant cash advances:

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  • The Alabama Mini-Code limits interest rates on loans under $2,000 to a maximum APR of 60%.
  • The state’s debt collection laws prohibit harassment, threats, misrepresentation and other unfair practices.
  • Alabama has laws against unfair and deceptive trade practices.
  • The state follows federal lending disclosure requirements like the Truth in Lending Act.

Depending on the specific terms and circumstances, an Alabama merchant cash advance attorney could potentially challenge agreements that violate these consumer protection laws.

Legal Defenses Against Merchant Cash Advances

Experienced attorneys can raise several defenses and legal strategies to dispute issues with merchant cash advances on behalf of Alabama small businesses, such as:

  • Usury claims – Argue the equivalent APR is illegally high under Alabama’s lending laws.
  • Deceptive practices – Allege violations of state and federal consumer protection statutes.
  • Unconscionability – Challenge oppressive and unfair contract terms.
  • Breach of contract – Claim the provider violated the agreement.
  • Bankruptcy – Discharge part or all of the debt through Chapter 7 or Chapter 11.
  • Improper debt collection – Assert violations of laws against harassment, threats, etc.

The right attorney will know how to thoroughly analyze the merchant cash advance agreement to identify potential violations and build a strong case for the business owner.

Finding the Right Alabama Merchant Cash Advance Attorney

It takes research and due diligence to find a qualified attorney experienced with the intricacies of merchant cash advances. Here are a few tips:

  • Ask for referrals from other local small business owners who have experience with merchant cash advances.
  • Check Alabama State Bar directories and look for lawyers listed under “financial services law.”
  • Search for attorneys or firms that mention merchant cash advances, business litigation, debt relief, etc. on their websites.
  • Contact the Alabama State Bar’s lawyer referral service for recommendations.
  • Schedule consultations and ask direct questions about their specific experience handling merchant cash advance cases.
  • Look for a track record of positive results, such as settlements or lawsuits resolved favorably for business clients.
  • Make sure the attorney clearly explains the potential defenses and strategies relevant to your situation.

When to Hire an Alabama Merchant Cash Advance Attorney

Here are some signs it may be time to seek legal help with your merchant cash advance:

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  • You are struggling to keep up with the daily repayment amounts.
  • The provider is aggressively calling or writing to collect payments.
  • You received notice of a lawsuit or threats to take other legal action.
  • A UCC lien was filed against your business assets or bank account.
  • You are facing bankruptcy or having to close your business.
  • You believe the agreement violates Alabama laws or contains unfair terms.

An experienced merchant cash advance attorney can protect your rights and provide guidance tailored to your situation. The sooner you consult with a lawyer, the more options you will have.

Conclusion

While merchant cash advances offer a fast way for small businesses to access capital, they come with a variety of risks and pitfalls. Companies in Alabama need to fully understand the terms and total costs before signing any agreement.If you are currently facing legal issues or aggressive collections related to a merchant cash advance, partnering with an experienced attorney can help safeguard your business. Be sure to do your research to find a lawyer knowledgeable about Alabama laws and legal strategies regarding merchant cash advances. With the right guidance, you may be able to resolve your situation through a settlement or by challenging potential violations.

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