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Arkansas Merchant Cash Advance Lawyers and Business Debt Relief

Running a small business in Arkansas can be tough, especially when cash flow gets tight. If you’ve taken out a merchant cash advance (MCA) to keep things afloat but are now struggling with payments, you may need legal help to get debt relief. I feel you – dealing with debt sucks. This article breaks down the basics on Arkansas laws around MCAs and business debt relief options to help you get pointed in the right direction.

The Deal with Merchant Cash Advances in Arkansas

Lots of Arkansas business owners end up taking out merchant cash advances at some point. MCAs provide quick access to capital by essentially selling a percentage of your future credit card sales in exchange for an upfront lump sum. The advantage is fast money with typically minimal eligibility requirements.But MCAs also come at a steep price – the equivalent annual percentage rates are sky-high, we’re talking 200-500% APR territory. And if your business takes a hit, those daily or weekly payments deducted from your credit card receipts can become crippling fast.So how are MCAs regulated in Arkansas? Well, here’s the thing – they’re basically not. Since MCA providers purchase future receivables instead of issuing loans, usury laws capping interest rates don’t apply. The lack of oversight means predatory lending practices often run rampant. Bummer.While there aren’t clear laws around MCA practices in Arkansas yet, some protections may be on the horizon. Attorney General Leslie Rutledge proposed new requirements in 2022 like limiting upfront fees and providing transparent disclosures on rates and terms. Fingers crossed legislators take action soon!

Debt Relief Options for Arkansas Small Business Owners

If you took out an MCA in Arkansas and are barely keeping up with payments, all hope isn‘t lost. You have options to find relief, both legal and financial. Here are a few solid places to start:

Work with an Attorney

Consulting an attorney experienced with MCAs is wise if you’re struggling with serious debt. They can review your agreements for any illegal or unethical provisions and potentially dispute violations. If you can prove predatory lending practices, you may be able terminate the MCA or negotiate a settlement. Attorneys can also advise if bankruptcy makes sense to eliminate the debt burden.

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Attempt Debt Settlement

If legal options don’t pan out or seem too costly, try negotiating directly with your MCA provider. Many will agree to settlements that lower your overall repayment amount. Sure, they have to write off some losses, but getting something is better than nothing if you end up going bankrupt otherwise.Typical settlement deals reduce the owed balance by 25-50% in exchange for lump-sum payment. Consult a tax pro because forgiven debt often counts as taxable income, meaning you could get hit with a tax bill later. Lame, but still likely better than continuing to drown in MCA payments.

Explore Bankruptcy Protection

Filing business bankruptcy stops collections and can eliminate MCA debts entirely. Chapter 7 liquidation halts payments and discharges unsecured debts like MCAs. The catch is that your company has to wind down operations.Chapter 11 reorganization also pauses collections while letting you propose a repayment plan over 3-5 years. You get to keep running the business but have to catch up on secured debts first. Legal and court fees for Chapter 11 run $5k or more too.Bankruptcy destroys your business credit reports for years. But when MCA debts threaten to tank the whole operation anyway, it can provide the fresh start you need to rebuild.

Consider Debt Consolidation

If bankruptcy sounds too drastic (it’s definitely not easy), debt consolidation could work. Consolidation rolls multiple debts like credit cards, loans, and MCAs into a single new loan with fixed monthly payments.The main benefit is simplifying payments into one lower amount each month. Consolidating also commonly stretches out the repayment timeline. Both changes help struggling cash flow.Drawbacks are that you pay more overall thanks to new interest and fees. And underlying business issues exacerbating money woes still need addressing for it to work long run.



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