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Connecticut Merchant Cash Advance Lawyers and Business Debt Relief

Running a small business can be extremely difficult, especially when it comes to managing finances and cash flow. Many Connecticut business owners turn to merchant cash advances to help ease some of their financial burdens, but these loans can also create legal issues that require the help of experienced lawyers. This article will provide an overview of Connecticut laws regarding merchant cash advances and discuss options business owners have for seeking debt relief.

What are Merchant Cash Advances?

A merchant cash advance (MCA) is a form of business financing where a company sells a portion of its future credit card sales in exchange for an upfront lump sum payment. An MCA provider essentially purchases the rights to collect daily payments from a business until the advance has been repaid in full, plus fees and interest.Unlike a traditional small business loan, MCAs do not feature set repayment schedules. Instead, the borrowing company makes payments by allowing the MCA provider to withdraw predetermined percentages from their credit card receipts. Once the MCA provider recovers the amount advanced plus all fees, the arrangement ends.

Connecticut MCA Laws and Regulations

Connecticut has laws and regulations specific to the MCA industry that aim to protect small businesses from predatory lending practices. In 2018, the state enacted Senate Bill 471 which instituted an interest rate cap of 60% APR on MCA agreements. This prevents providers from imposing excessively high rates and fees.However, some MCA companies attempt to skirt state laws by structuring their advances as purchases instead of loans. So Connecticut also imposes limitations on related fees and charges through Title 36a of state statutes. This law restricts factors related to the transaction such as application fees, due diligence fees, underwriting fees or any other charges associated with obtaining the MCA.

Challenging the Legality of Merchant Cash Advances

If a Connecticut business owner enters into an MCA agreement with unreasonable or illegal terms, they may be able to challenge the validity of the contract. An experienced business lawyer can review the documentation and determine if the provider violated applicable laws.Some potential grounds for challenging an MCA include:

  • Excessive interest rates over 60% APR
  • Improper fees not permitted under statute
  • Failure to properly register as a lender in Connecticut
  • Issues with arbitration clauses or choice of law provisions

If a lawyer discovers violations in the MCA documents, they can send a demand letter on the client’s behalf refusing to make further payments. They may also file complaints with state regulators regarding noncompliance with lending laws.

Seeking Debt Relief for Merchant Cash Advances

If a Connecticut small business cannot keep up with MCA payments, they risk the provider aggressively withdrawing large percentages of daily credit card receipts. This can severely hurt cash flow and operations.In these situations, business owners need help negotiating with MCA companies to seek debt relief options such as:

  • Payment plans with smaller installment amounts
  • Agreements to only withdraw reasonable percentages from receipts
  • Partial debt forgiveness
  • Lump sum settlements for less than the full balance

An experienced Connecticut MCA lawyer will know how to approach these negotiations and deal with aggressive collection tactics. They can also provide alternatives if the MCA provider refuses to offer reasonable settlement arrangements.

Using Bankruptcy to Discharge Merchant Cash Advance Debt

One of the more extreme options for debt relief is bankruptcy, which can discharge or eliminate eligible business debts. However, the ability to erase MCA obligations through bankruptcy depends on how the specific advance is classified.If the MCA is considered a loan, it may qualify as dischargeable debt under Chapter 7 or Chapter 11 bankruptcy. But providers often structure advances as purchases rather than loans to avoid discharge.A skilled Connecticut bankruptcy lawyer will thoroughly analyze the MCA agreement to find potential loopholes for discharging the debt. They will also assess whether the client meets eligibility requirements for the different bankruptcy chapters based on their overall financial situation.

Finding the Right Connecticut MCA and Debt Relief Lawyer

The complex legal issues surrounding merchant cash advances underscore the importance of retaining an experienced Connecticut attorney. Business owners should look for lawyers with specific expertise regarding state MCA regulations and debt relief alternatives.Ideally, a good MCA lawyer will have a strong track record negotiating settlements with providers. They will also understand the intricacies of structuring potential bankruptcy filings to discharge all eligible debts.Reliable legal directories like Avvo and LawInfo offer listings of qualified local lawyers in this field for easy reference.Running a Connecticut small business presents enough challenges without struggling under the weight of merchant cash advance debt. But the state provides meaningful protections, and lawyers can help maximize those rights. With the right help, companies can resolve MCA legal issues and regain their financial footing.





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