Most people think debt relief means there has to be a stack of advances or some other crushing debt burden. When you have a single advance, you might not see all the problems that come with too much cash advance debt. But that does not mean a single advance is not serious enough to warrant help. One advance is all you need to be in an untenable position.
The number of advances isn’t as important to the need for debt relief as the debt to cash flow ratio is. In other words, the question is whether you’re carrying too much debt relative to your cash flow. If that’s the case, debt relief can help. It’s not just for companies with stacks; it’s about finding the right fit for your situation. If you’re losing sleep over repayments or if your cash flow is too tight to breathe, it pays to understand why a single advance can do so much damage.
A Single Advance Can Put You in a Serious Bind
A merchant cash advance is borrowed against sales your business only hopes to make, and future sales revenue is uncertain. (Wouldn’t that be nice if it wasn’t?) You have to pay back the advance out of the money you get when customers actually pay you. And if you don’t make those sales, there’s no way to pay back the advance. This is every bit as real for one advance as it is for stacks. That’s only the beginning of the problems for borrowers.
The bigger problem is the terms, which are often unfavorable to the owner. The repayment schedule is very unforgiving, and the typical advance contract does not allow for even one missed payment. Even being late on a payment can result in default. The terms create serious pressure, pushing you toward the wall. What if the payments are so large they threaten your business’ survival? If you can’t keep up with the payments, what happens next?
If a borrower fails to meet these contractual obligations, he or she is considered to be in default. And in cash advance financing, the consequences are severe. If your company cannot pay promptly, the funder may sue you or a representative of the business for more than what they are owed. Eventually, your company’s assets may even be seized to recover the unpaid amount. In short, a single advance can put you in a serious bind.
None of this means you did something foolish by taking the advance. When the pandemic hit, most small businesses were fighting for survival. Suddenly, you needed a way to stay afloat, and an advance was there. Hardly anyone knew it would hit so hard and so fast. Some owners did not know the risks of an advance before they were offered one. Others knew the risks but did not fully understand them, and still others understood them and simply had no other options. There’s always a story and a reason. No one can hold that against you. That’s why debt relief exists - because the terms are brutally unforgiving, and even a single advance can leave you in a precarious position. Funder relationships are what they are: exchanges of promises and expectations. If that relationship becomes untenable and you are being forced to sacrifice your business just to keep the funder’s promise, that is what debt relief is all about. It’s not just about having a stack of advances or maxing out credit cards. It’s about not being able to fulfill the terms of an agreement, which can happen even with a single advance.
Your Options
But let’s face it - you wouldn’t be asking for help if you could just “pay it back.” There’s no easy way out. So, what are your options?
The most obvious one is to reduce staff or cut other expenses. It may be painful, and in many cases, it will affect those you care about. And the worst part is, it could still not be enough.
Another option is negotiating with your creditors. It’s worth looking into. You will need to be persistent, and there is no guarantee of success. This is also where a business debt settlement company like ours comes in. At Delancey Street, our senior advisors negotiate with funders and lenders for less than the full balance owed, and we do not sell you another loan.
And then there is bankruptcy. A lot of people still think of bankruptcy as an option of last resort and an absolute failure for the owner. It can be a way to a fresh start, though. It’s not a way of running away from your problems. Chapter 11 in particular may be the right answer for a small business carrying more debt than it can handle. So, is bankruptcy the right choice for your business? It’s not an easy decision, but if the debt is more than you can handle, it may be your best option. We are not a law firm, so when bankruptcy is the better path, we route owners to bankruptcy counsel, for instance for a Subchapter V case.
Relief Might Be the Answer
So, back to the question. The answer, like most things, is “it depends,” but if it’s putting too much stress on you and/or your business, it is. A single advance can put you in a position where you can’t move forward. You could be one late payment away from default, even if you’re fine until then. For some business owners, they may consider their business debt to be “small,” “isolated” or “only one,” but it can still create a lot of pressure. But if you feel overwhelmed by the repayments, or if you’re at risk of default and then losing your business, then it’s definitely worth exploring your options. If one advance is doing more harm than good, relief might be the answer. A first consultation with us is free and confidential, and if your case can’t be won, or a cheaper option exists, we will tell you so on that first call.
