Massachusetts Merchant Cash Advance Legal Help
Merchant cash advances can seem like easy money for small business owners in Massachusetts. You get an upfront lump sum of cash quickly with no credit check. But those high fees and daily repayment rates can sink a business if you aren’t careful. Let’s break down how merchant cash advances work, your legal rights and defenses as a business owner in Massachusetts, and when it may be time to contact an attorney about debt settlement or bankruptcy.
How Do Merchant Cash Advances Work in Massachusetts?
A merchant cash advance isn’t really a “loan” in the traditional sense. Instead, it’s the purchase of a percentage of your future credit card and debit card sales. You get a lump sum upfront, usually between $5,000-$500,000. Then the lender takes a fixed percentage of your daily credit card receipts – typically between 10-20%, but sometimes as high as 40% – until the advance has been repaid in full plus fees.Unlike a term loan, there’s no set repayment schedule with fixed monthly payments. The daily payments fluctuate based on sales volume. So if you have a slow month, you pay less. But a busy month means more money goes back to repay the advance quicker.This flexibility seems great at first. But it can bury a struggling business if sales drop or that huge repayment percentage eats too deeply into margins. Many merchants think they can handle a 20% deduction when they sign the agreement. But when that actually hits the books during slow seasons, it can mean layoffs, bankruptcy, and business failure.
Common Legal Issues and Complaints About Merchant Cash Advances
The single biggest complaint business owners have about merchant cash advance companies operating in Massachusetts is lack of transparency on rates and terms. For example:
- Effective APRs often 200-400% – ten times higher than a business loan.
- Short 2-3 page agreements without clear fee disclosures.
- Language allowing lenders to debit business accounts directly without warning.
- Personal guarantee clauses holding the business owner liable for repayment.
Other common merchant cash advance complaints in Massachusetts include:
- Misrepresenting the product as a “loan” and not clearly explaining the daily repayment structure.
- Aggressive collections tactics like harassing phone calls and lawsuits against personal assets.
- Not providing clear monthly statements detailing amounts paid to date.
- Requiring mandatory mediation vs. allowing lawsuits for unethical behavior.
Under Massachusetts law, lenders cannot engage in unfair and deceptive practices. If you feel a merchant cash advance provider has misled you or engaged in predatory lending, contact a business attorney to discuss your rights.
4 Legal Defenses Against Merchant Cash Advance Lawsuits
If you fall behind on payments, many merchant cash advance providers will quickly file a lawsuit against your business. Typical claims include breach of contract and unjust enrichment. But savvy business owners have legal defenses to fight back against these lawsuits:
1. Lack of Proper Documentation
Cash advance agreements must clearly lay out all fees, rates, and terms for repayment. Vague 2-3 page contracts may be deemed unenforceable if critical info was omitted. Force the lender to prove you understood all material facts.
2. Misrepresented as a “Loan”
Merchant cash advance lawsuit defendants have argued they thought they were getting a fixed-rate loan with set repayment terms. If the product was misrepresented, that’s grounds to invalidate the agreement.
3. Unconscionable and Unfair Contract Terms
Even if a contract is clear, Massachusetts courts won’t enforce terms deemed unfair or grossly one-sided. For example, effective interest rates over 90% or personal guarantee clauses could be deemed unconscionable depending on specifics.
4. Illegal Lending and Collections Tactics
It’s illegal in Massachusetts to misrepresent rates, harass borrowers over the phone, or directly debit accounts without notice. Such unethical tactics could invalidate the underlying agreement and relieve you of repayment duties.
When to Contact a Merchant Cash Advance Attorney
If you feel trapped in a merchant cash advance agreement with unrealistic repayment terms and fees, don’t wait until you get sued to contact an attorney. The sooner you consult expert counsel, the better your options.A business lawyer can review your agreement for weaknesses and begin negotiating with the lender for settlement or modified terms. If talks fail, they can defend you in litigation. An attorney can also advise if bankruptcy or debt settlement makes more financial sense than continued struggling under the merchant cash advance agreement.Every situation is unique, but some good rules of thumb on when to lawyer up include:
- You didn’t clearly understand fees, rates, and terms before signing.
- Monthly payments are sinking your business finances.
- The lender refuses to provide detailed monthly statements.
- You are facing aggressive collections calls and lawsuit threats.
Finding the Right Merchant Cash Advance Attorney
There are many great business and commercial litigation attorneys in Massachusetts who can advise on merchant cash advance disputes and lawsuits. As you interview lawyers, look for these key traits:
- Deep contract law expertise – Can quickly spot unconscionable terms and flaws.
- Litigation experience – Won’t hesitate to take bad actors to court.
- Small business understanding – Gets the realities of running a small business.
- Reasonable fees – Flexible rates and payment plans.
Reputable attorney directories like Avvo, LawInfo, and FindLaw make it easy to find lawyers based on specialty, location, and client reviews. Look for ones who offer free consultations so you can discuss your situation at no risk.
Turning Things Around – You’ve Got This!
Getting trapped in a predatory merchant cash advance agreement can happen to anyone. Don’t beat yourself up over the past. Instead, shift focus to fixing the problem.With some expert legal advice and a plan to boost business, you can negotiate a settlement and free yourself from the burden of high repayment rates. Then it’s just a matter of rebuilding sales and credit.You had the guts to start a business once. Tap into that same grit and determination to take back control. This too shall pass. Brighter days are ahead!