Fort Worth Merchant Cash Advance Legal Help – Attorneys Provide Debt Settlement
Merchant cash advances (MCAs) have exploded in popularity among small businesses in Fort Worth. While MCAs can provide quick access to capital, they also come with some major drawbacks that business owners should be aware of. This article will provide an overview of MCAs in Fort Worth, discuss the pros and cons of these financing arrangements, and explain why it’s crucial to work with an experienced merchant cash advance attorney when dealing with MCA debt.
What is a Merchant Cash Advance?
A merchant cash advance is a form of business financing where a company sells a portion of its future credit card sales to an MCA provider in exchange for an upfront lump sum payment. Unlike a loan, MCAs don’t come with fixed monthly payments. Instead, the business agrees to pay back the advance through an agreed upon percentage of daily credit card sales until the balance has been repaid (plus fees and interest that can amount to the equivalent of a 70-200% APR).On the surface, MCAs seem fast and convenient. The approval process is quick, funding can be received in as little as 24 hours, and no collateral is required. However, the cost can quickly spiral out of control if the business has a slow season or unexpected financial hardship.
-Pros and Cons of Merchant Cash Advances
While the quick funding is appealing, there are considerable downsides business owners need to consider before signing an MCA contract:Pros:
- Fast approval and funding, often within 24 hours
- No collateral required
- Funds can be used for any business purpose
- Option for businesses that don’t qualify for bank loans
Cons:
- Extremely high equivalent interest rates
- Daily repayments vary based on credit card sales
- Costs can quickly become unmanageable
- Aggressive collections tactics if in default
- Confessions of judgement in contracts
- Personal guarantees frequently required
As you can see, the risks posed by merchant cash advances frequently outweigh the temporary liquidity they provide. Yet in Fort Worth, Texas, countless small business owners have signed these contracts without fully grasping the potential consequences.
Why Legal Help is Essential When Dealing with MCAs
Here are some key reasons why legal help is so valuable:
-- Review contract terms – The contracts are notoriously long and complex. An attorney can help business owners understand what they’re signing including interest rates, repayment terms, personal guarantees, and other key provisions.
- Negotiate better deals – Lawyers frequently negotiate improved terms with MCA providers regarding rates, repayment percentages, contract length, and personal liability.
- Explore alternatives – Attorneys help clients understand other, less risky financing options that may be available like business loans, lines of credit, or factoring.
- Defend against aggressive collections – When businesses default, MCA providers often engage in harassment, threats, contacting customers, freezing bank accounts unlawfully and even trying to garnish wages illegally. Experienced lawyers can put an immediate stop to this and protect the client’s rights.
- Fight unlawful contract terms – Some MCA contracts contain provisions that violate state laws around lending, debt collection, and consumer protection. Attorneys leverage these violations to invalidate illegal contract terms and get debts reduced or dismissed.
- Explore bankruptcy – For businesses facing unmanageable MCA debt, bankruptcy may provide the clean slate needed to start over. A business bankruptcy lawyer can advise if this path makes sense.
Without legal guidance, business owners can unwittingly sign grossly unfair MCA contracts that lead to financial ruin. Conversely, an attorney can help steer clients toward responsible financing options that fuel growth rather than cripple it.
Finding the Right Fort Worth Merchant Cash Advance Attorney
If you are considering or dealing with a merchant cash advance in Fort Worth, it’s essential to find an attorney experienced in this unique and complex field. Here are some tips for finding the right legal help:
- Search for MCA-specific experience – Look for lawyers who explicitly state they have extensive MCA and alternative business financing experience. General finance law expertise isn’t enough.
- Ask about MCA contract review – A qualified attorney should offer to review any proposed MCA contract and highlight unlawful or concerning clauses. They can then negotiate improved terms on your behalf before signing.
- Seek help with aggressive collections – If an MCA provider engages in harassment, threats, or unlawful collections tactics, consult a lawyer right away regarding Texas law and your options.
- Consider debt settlement or legal action if the MCA company engages in unlawful collections. While merchant cash advances can be tempting due to fast approvals and funding, they come with a major risk of spiraling unaffordable debt. Tread carefully and secure legal guidance to protect your interests.
With the right education and support, you can make the best financing decisions for your Fort Worth business. Reach out to an experienced MCA attorney today to discuss your options.
What Happens if You Default on an MCA?
Defaulting on a merchant cash advance can spur several serious consequences including:
- Aggressive collections – Third-party debt collectors will start calling and showing up in person demanding repayment. They may also contact customers and vendors which can harm relationships.
- Lawsuits and judgments – The MCA provider will likely sue for breach of contract. Many MCA contracts contain “confessions of judgment” allowing lenders to obtain a judgment without even notifying the borrower.
- Asset seizure – If the lender gets a judgment, they can seize assets or freeze bank accounts. Texas law grants protections here but businesses must take legal action to enforce their rights.
- Harm to credit – Defaulting can seriously damage business credit scores making future financing difficult. Personal credit may also take a hit if owners provided a personal guarantee.
- Business instability – The financial and emotional stress of collections, lawsuits, bank levies, and asset seizures can severely impact business operations and revenue.
However, experienced attorneys can help mitigate these outcomes through settlement negotiations, asserting defenses, and advising business owners on their rights. The key is seeking counsel at the first hint of trouble rather than waiting until collections have already begun.
-Defenses Against Merchant Cash Advance Collections
If your Fort Worth business is struggling to repay a merchant cash advance, all hope is not lost. Business attorneys routinely help clients fight back against predatory MCA tactics. Here are some potential defenses:
- Violations of lending laws – Merchant cash advances fall into a legal gray area in some states. Experienced lawyers can leverage violations of state lending and finance laws.
- Unconscionability claims – Courts sometimes rule contracts “unconscionable” if the terms unreasonably favor one party. This can invalidate parts of the contract.
- Negotiating settlements – In some cases, lenders will negotiate discounted settlements rather than risking a lawsuit. A 20-50% settlement is sometimes possible.
The key is acting quickly when trouble arises rather than waiting until extensive damage has been done. An attorney sends a strong message that you take the debt and your rights seriously.
Alternatives to Defaulting
Before defaulting, businesses should explore these options to resolve merchant cash advance debt:
-- Debt consolidation – Borrow money at lower rates to pay off the MCA and establish affordable payments
- Working with the MCA provider – Openly communicate about financial hardship and request modified repayment terms
- Debt settlement – Hire an attorney to negotiate a lump-sum discounted settlement
- Chapter 11 bankruptcy – Allows repayment plan adjustment while allowing business to continue operating
- Chapter 7 bankruptcy – Liquidates company assets to pay creditors but allows “fresh start”
While all these options have pros and cons, the key is being proactive. Waiting until collections have begun seriously reduces a business’s leverage. Consult a lawyer at the first sign of trouble – their guidance can save your company.
How Can a Fort Worth Merchant Cash Advance Attorney Help?
As you can see, merchant cash advances pose considerable risks. However, experienced attorneys can provide vital assistance including:
- Contract review – Analyze MCA contracts to identify unlawful terms.
- Term negotiations – Work to improve proposed MCA terms before signing.
- Collections defense – Stop harassment and unlawful collections tactics.
- Settlement negotiations – Secure deep discounts on MCA debts.
- Leveraging defenses – Invoke lending violations to invalidate debt.
- Advising on bankruptcy – File Chapter 11 or Chapter 7 if needed.
- Ongoing support – Provide guidance across the entire MCA process.
Options for Avoiding Merchant Cash Advance Debt
Rather than resorting to a risky MCA, Fort Worth businesses have several alternative financing options including:
- Bank loans – Have fixed rates and terms but can take weeks to secure. Require strong credit and collateral.
- SBA loans – Backed by government to encourage lending to small business. Also require strong credentials.
- Business lines of credit – Provide ongoing access to capital though less than a loan. Need good credit.
- Invoice factoring – Sell unpaid customer invoices for immediate cash at a discount.
- Equipment financing – Borrow against specific equipment you need to grow.
- Angel investors – Get startup capital from high-wealth individuals in exchange for equity.
- Crowdfunding – Raise small investments from a large number of supporters.
While these may not provide capital quite as fast as MCAs, they come without the risk of crushing debt. Discuss options with a lawyer or reputable financial advisor before making financing decisions.
Turning to a Merchant Cash Advance Attorney for Help
Dealing with a merchant cash advance can quickly become an overwhelming financial and emotional burden. Before it’s too late, Fort Worth businesses should turn to attorneys who provide services like:
- Contract review – Analyze proposed MCA contracts and highlight potentially problematic terms before signing.
- Term negotiation – Improve MCA terms regarding rates, payment percentages, length, and personal liability.
- Collections defense – Stop harassment, threats, bank levies and other illegal collection tactics.
- Settlements – Negotiate discounted lump-sum payoffs so clients can move on.
- Leverage defenses – Invoke lending regulation violations and get debts waived or reduced.
- Bankruptcy counseling – File Chapter 11 or Chapter 7 if reorganization or liquidation are needed.