Merchant Cash Advance Attorney Alabama

Getting a merchant cash advance can seem like a quick and easy way for businesses to access capital. Unlike traditional bank loans, merchant cash advances don’t require a strong credit history or collateral. The merchant simply agrees to repay the advance through a percentage of their future credit card sales. But merchant cash advances come with some major drawbacks that business owners need to look out for. That’s where working with an experienced merchant cash advance attorney in Alabama can help.

How Merchant Cash Advances Work

Here’s a quick rundown of how merchant cash advances work:

• The merchant cash advance company provides an upfront lump sum to the business, usually between $5,000 – $500,000.
• In exchange, the business agrees to repay the advance through daily payments taken as a percentage of their credit card sales, usually between 10-20%.
• The payments continue until the full amount is repaid plus fees and interest, which can equal an equivalent annual percentage rate of 60-300%.
• The cash advance company takes the repayments directly from the business’s credit card receivables account through daily debits.
• There’s usually no fixed repayment term, the business repays the advance as quickly or slowly as their credit card sales allow.

While this flexibility and quick funding may sound appealing, merchant cash advances can become extremely expensive for businesses. That’s why it’s critical to read the fine print and understand the full costs before signing any merchant cash advance agreement.

Problems with Merchant Cash Advances

Merchant cash advances seem straightforward on the surface, but several problematic issues can arise:

• Deceptively high costs – The equivalent APRs often end up between 60-300%, much higher than business loans.
• Daily repayment pressure – The daily repayment structure can strain cash flow if sales dip.
• No fixed end date – Repayment continues until the full amount is collected, which may take months or years.
• Balloon payments – Some agreements have a large lump sum due at the end, which can be a surprise.
• Personal guarantees – Owners may have to personally guarantee repayment, putting their home and assets at risk.
• Aggressive collections – Cash advance companies can aggressively pursue repayments, including filing lawsuits.

With so many potential pitfalls, it’s easy for businesses to get in over their heads with merchant cash advances. An experienced attorney can help you avoid these problems or find solutions if you’re already dealing with them.

Alabama Laws Related to Merchant Cash Advances

Alabama has laws regarding lending and debt collection practices that may apply to merchant cash advances:

• The Alabama Mini-Code limits interest rates on loans under $2,000 to a maximum APR of 60%.
• The state’s debt collection laws prohibit harassment, threats, misrepresentation, and other unfair practices.
• Alabama has laws against unfair and deceptive trade practices.
• The state follows federal lending disclosure requirements like the Truth in Lending Act.

Depending on the specific terms and circumstances, an Alabama merchant cash advance attorney may be able to challenge agreements that violate these consumer protection laws.

Defenses Against Merchant Cash Advances

Some possible defenses and strategies that an attorney could use to dispute issues with merchant cash advances include:

• Usury claims – Argue the equivalent APR is illegally high under state lending laws.
• Unconscionability – Challenge unfair, deceptive, or abusive terms in the agreement.
• Breach of contract – Argue the cash advance company violated the agreement.
• Violations of state/federal law – Cite violations of lending, debt collection, or consumer protection laws.
• Improper service of process – Challenge errors made when suing or collecting judgments.
• Settlement negotiation – Negotiate a lump-sum payoff for less than the full balance.
• Bankruptcy – Use Chapter 7 or Chapter 11 to discharge part or all of the debt.

An attorney experienced with merchant cash advances will know how to analyze the agreement to spot potential violations and build a strong legal case for the business owner.

Finding the Right Merchant Cash Advance Attorney in Alabama

Finding an attorney experienced with merchant cash advances takes some research. Here are a few tips:

• Ask for referrals from other local business owners who have dealt with merchant cash advances before.
• Check lawyer directories like Martindale-Hubbell and look for attorneys listed under “financial services law.”
• Search online for lawyers or law firms in your state that mention merchant cash advances, business litigation, debt relief, etc. on their websites.
• Contact your state bar association and ask if they have a lawyer referral service or list of members specializing in this field.

Schedule consultations with a few potential attorneys to discuss your situation and make sure they have the right experience. Come prepared with copies of your merchant cash advance agreement and records of payments, fees, communications with the lender, etc. Ask direct questions about their specific experience handling cases like yours, the strategies they would use, and potential outcomes they could achieve. Gauge their responsiveness and how well they listen to your concerns.

An attorney well-versed in merchant cash advance issues should be able to explain the potential defenses and claims that could apply in your case and discuss realistic expectations. They should have a track record of positive results for their business clients, whether that’s negotiating settlements, defending lawsuits, or challenging the agreements. They should clearly outline their fees and billing practices too.

Finding the right legal help can relieve a lot of the stress of dealing with a merchant cash advance gone wrong. An experienced attorney can assess your situation, advise you on the best course of action, and handle negotiations or litigation if needed. With the right lawyer on your side, you can focus on running your Alabama business again.