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Merchant cash advances can seem like quick fixes when businesses need fast cash. But those funds can turn into headaches when repayment gets tough. If your small biz has taken on too many merchant cash advances (MCAs), you may need to restructure the debt to avoid default.

What is a Merchant Cash Advance?

An MCA works differently than a traditional small biz loan. Basically, a funding company buys a chunk of your future credit card receipts at a discount.For example, they give you $100K upfront in exchange for $130K of your future sales over the repayment period. That extra $30K is the fee you pay for the cash advance.You pay back the advance through daily bank account withdrawals, usually 10-20% of daily credit card sales. The fees and payment structure make it basically a high-interest rate loan.

Know the Key MCA Details

Before trying to restructure MCA debt, understand the key deets:

  • Original advance amount
  • Percentage taken from credit card sales
  • Total repayment amount owed
  • Time left
  • Prepayment penalties or fees

You’ll need this info to decide if restructuring makes sense. The goal is to reduce the burden to a manageable level.

Merchant Cash Advance Restructure Options

There are a few options for MCA restructuring:

MCA Reconciliation

Many MCA agreements have mandatory reconciliation clauses. This requires the lender to review your account periodically to ensure the repayment schedule aligns with your actual credit card sales.If your sales have dropped, you can request an adjustment to the daily repayment amount. Just be prepared to show detailed sales records to back up your request.

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MCA Consolidation

If you have multiple MCAs outstanding, consolidation may help. This combines all the agreements into one new advance with lower fees and payments.But not all lenders allow consolidation, so shop around. And consolidation lengthens the repayment period, meaning you pay more interest overall.

MCA Settlement

You can attempt to settle your MCA debt by negotiating to pay less than you owe. But doing this solo has big risks.Lenders may agree to settle if they don’t think you can repay the advance. They get something rather than nothing.

Legal Help for MCA Debt Relief

An experienced business attorney can advise you on MCA restructure options and handle negotiations. This gives you the best shot at settling on favorable terms.If you default, the lender will likely sue. A lawyer can respond to the lawsuit and defend your business interests.

What Happens if You Don’t Pay Your MCA?

Best case, you’d easily pay off MCAs as agreed. But cash flow fluctuates, so you may default.Consequences of not paying your MCA include:

  • Late fees and penalties
  • Increased daily repayment percentage
  • Confession of judgement
  • Lawsuit against your business
  • Bank levies to seize assets
  • Credit score damage
  • Shut off access to additional financing

These outcomes can spiral, putting your business at risk. Acting quickly gives more restructure and settlement options before things escalate.

Tips for Avoiding MCA Trouble

While MCAs provide fast financing, they come with big risks. Here are tips to avoid repayment headaches:

  • Read the fine print – Understand the full costs and obligations before signing anything.
  • Budget carefully – Make sure you can afford the daily payments before taking an advance.
  • Limit balances – Don’t take on more MCA debt than your business can realistically handle.
  • Have a lawyer review – An attorney can help explain the terms and risks before you commit.
  • Explore alternatives – Shop around for financing with lower rates and fees if possible.
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Get Legal Help with Your Merchant Cash Advance

Merchant cash advances seem easy but can wreak havoc on small businesses. If you need to restructure or settle MCA agreements, get advice from an experienced attorney.They can review your situation, explain all options, negotiate new terms, and defend you in court if sued. Don’t tackle MCA debt relief alone – legal guidance maximizes the chance of favorable outcomes.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

"Super fast, and super courteous, Delancey Street is amazing"
Leo
$500,000 MCA Restructured Over 3 Years
"Thanks for helping me in literally 24 hours"
Jason
$250,000 SBA Loan Offer in Compromise
"Great choice for business owners who need a trustworthy partner"
Mary
$350,000 MCA Restructured Over 2 Years

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