Colorado Merchant Cash Advance Attorney
Merchant cash advances have become a popular form of alternative business financing in Colorado. However, some business owners have found themselves struggling with excessive fees, high interest rates, and aggressive collection tactics from merchant cash advance companies. If you are a Colorado business owner dealing with legal issues related to a merchant cash advance, this article provides an overview of your options and how a merchant cash advance attorney can help.
What is a Merchant Cash Advance?
A merchant cash advance (MCA) provides businesses with quick access to capital based on a percentage of future credit card sales. Here’s how it works:
-- A merchant cash advance company provides a business with an upfront lump sum of capital, usually between $5,000 – $500,000.
- In exchange, the business agrees to repay the advance through daily or weekly payments taken automatically as a percentage of credit card sales, generally 10-20%.
- There is no set repayment schedule. The business repays the advance as credit card sales come in.
- The total repayment amount varies based on the business’s credit card volume. Businesses with low sales volumes end up paying back more over a longer period.
- MCAs are not considered loans under Colorado law and have fewer regulations compared to bank loans.
Why Hire a Merchant Cash Advance Attorney?
While merchant cash advances provide fast access to capital, the lack of oversight has led some providers to engage in predatory practices that take advantage of small business owners. Here are some signs you may need to consult a merchant cash advance attorney:
- Excessively high interest rates – Some MCA companies charge annualized rates over 100%, which may violate Colorado usury laws. An attorney can review your agreement for potential violations.
- Misleading statements – Providers may misrepresent costs, eligibility, or other key terms. An attorney can identify any deceptive marketing practices.
- Aggressive collections – MCA companies may harass you or attempt illegal collection tactics. An attorney can take over communications and stop harassment.
- Lawsuits – Many MCA providers file lawsuits over unpaid balances. An attorney can defend you in court.
- Frozen accounts – MCA companies may freeze your business bank accounts or credit card processing. An attorney can help release funds.
- Personal liability – Most MCAs require a personal guarantee, so owners are personally responsible for the debt. An attorney can advise on protecting personal assets.
Legal Defenses Against Merchant Cash Advances
If you are facing legal action over an MCA, a merchant cash advance attorney can raise potential defenses to dispute the agreement’s validity or your liability. Here are some common defenses:
- Unconscionability – Argue the contract terms are unfair and one-sided. Courts may refuse to enforce unconscionable contracts.
- Usury violations – Allege the interest rate exceeds Colorado’s usury limit of 45%. Usury laws cap interest on loans.
- Deceptive practices – Claim the provider used false statements or misrepresentations to induce you to sign. This can invalidate contracts.
- Breach of contract – Argue the company did not fulfill its contractual obligations. This may release you from the agreement.
- Duress – Allege you signed the contract under duress or coercion, making the agreement invalid.
- Inaccurate statements – Dispute any inaccurate statements about balances, fees, payments due, etc.
Negotiating Merchant Cash Advance Settlements
Rather than litigation, your attorney may be able to negotiate a settlement with the MCA company for less than the full balance owed. This can save significant time and legal expenses. In a settlement both sides agree to compromise – you pay a reduced amount and the MCA company writes off the remainder.Here are some tips for negotiating the best settlement:
- Get statements in writing – Any settlement offers or agreements should be in writing to be enforceable.
- Know your leverage – Factors like legal defenses, inability to pay, or bankruptcy can strengthen your position in settlement talks.
- Start low – Begin negotiations with a low offer, typically 20-40% of the balance. See what the company counters with.
- Meet in the middle – Successful settlements usually end up around 50-60% of the balance owed.
- Get release of liability – Ensure the deal includes a full release of all claims and liability under the MCA.
Alternatives to Merchant Cash Advance Settlements
If you are unable to reach a settlement, your merchant cash advance attorney may recommend these additional options:
-- Forbearance agreement – The MCA company agrees to temporarily accept reduced payments, extend the repayment term, or make other concessions to help you repay.
- Payment plan – Work out a repayment schedule with fixed monthly payments at reasonable levels you can afford.
- Debt restructuring – Renegotiate the entire agreement, such as lowering the payment percentage deducted from sales.
- Bankruptcy – File for Chapter 7 or Chapter 11 bankruptcy to discharge all or part of the MCA debt.
- Litigation – As a last resort, sue the MCA company over violations and unlawful practices related to your agreement.
Finding the Right Merchant Cash Advance Attorney
If you need legal help related to a merchant cash advance in Colorado, make sure to choose an attorney with specific experience handling MCA cases. Here are some tips:
- Search for attorneys focusing on “merchant cash advance relief” or “MCA debt settlement.
- Look for lawyers familiar with Colorado’s laws and courts. Local experience is a plus.
- Ask about experience negotiating MCA settlements and defending lawsuits.
- Inquire about typical fees and billing arrangements. Avoid attorneys requesting large upfront retainers.
- Meet with lawyers to discuss your case details and assess communication style.
- Look for attorneys offering free consultations and flexible payment plans.
- Check qualifications and disciplinary history through the Colorado Bar Association.
- Read online reviews from past clients regarding their experiences.
- Ask for references from other attorneys or professionals who have worked with the lawyer.
With the right legal guidance, Colorado business owners can resolve merchant cash advance debt, defend against lawsuits, and regain financial stability. Don’t hesitate to contact an experienced merchant cash advance relief attorney for help assessing your options.