Should I Hire A Merchant Cash Advance Attorney?

So you got a merchant cash advance and now the payments are killing your business. You feel trapped and don’t know what to do. Should you hire a lawyer to get you out of this mess? This is a common situation for many small business owners who got into an expensive merchant cash advance without realizing what they were getting into. Don’t worry, you have options. Let’s break it down.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of business financing where a company gives you an upfront lump sum of cash in exchange for a percentage of your future credit card sales. There’s usually no fixed repayment schedule – you just pay back a fixed amount every day until the full amount is paid off. Easy right? Not always…

The problem is that the fixed daily repayment amount is a percentage of your credit card sales, often 15-20%. So if you have a slow month, you’re still on the hook to pay that daily amount or you go into default. And those repayments don’t go towards paying down the principal – they go towards fees and interest that can have APRs over 200%!

Pros Cons
  • Fast approval
  • No collateral required
  • Fixed daily repayment
  • Very high interest rates
  • Daily payments even if sales are down
  • Hard to pay off principal

As you can see, merchant cash advances can get expensive fast. So if you’re struggling to make the payments, is it time to lawyer up?

Do You Need a Merchant Cash Advance Attorney?

Every situation is different, but there’s a few key things to consider:

  • Was there deception or fraud when you signed up? If the MCA company lied or misled you about terms, you may have a case.
  • Are the fees and rates legal in your state? Some states have caps on interest rates.
  • Did you actually understand the terms? Complex legal agreements can sometimes be ruled unenforceable.

If you believe the MCA company acted illegally or you didn’t understand the terms, a lawyer may be able to get the agreement voided or modified. They can also negotiate a settlement if you just want out.

But if you understood the (albeit terrible) terms and there’s no evidence of unlawful conduct, your options are limited. The agreement is probably enforceable and defaulting will trash your credit. In those cases, a lawyer can’t work miracles but may be able to negotiate reduced payments.

The most important thing is act fast if you want to hire a lawyer. Once an MCA company starts collection efforts and hits your credit, it becomes much harder to fight back.

Finding the Right MCA Attorney

Not all lawyers understand the intricacies of merchant cash advances. You want someone experienced specifically in MCA agreements. Look for these credentials:

  • Member of the Commercial Law League of America
  • Certified by the American College of Consumer Financial Services Lawyers
  • Rated by Super Lawyers or Martindale-Hubbell

A good MCA lawyer will thoroughly review your agreement and business finances to build the strongest case. Be prepared to pay a retainer fee upfront – fees typically range from $2,000-$5,000 to start. It’s an investment that can pay off if the lawyer gets your agreement voided or modified.

When researching attorneys, ask these key questions:

  • What experience do you have with merchant cash advance cases specifically?
  • What are the strategies you would use to defend my case?
  • What are the estimated total fees through the end of my case?
  • What results have you gotten for past clients in similar situations?

Avoid lawyers who can’t give detailed, specific answers. You want confidence they know this niche and have a plan of attack.

Alternatives to Hiring a Lawyer

Lawyers can be expensive. If funds are tight, consider trying these steps first:

  1. Negotiate directly – Ask the MCA provider for reduced payments or altered terms. Get any agreements in writing.
  2. Pause payments – Ask for a few months grace period to improve cashflow. Offer to extend the agreement.
  3. Refinance – If possible, get a lower-interest business loan to pay off the MCA balance.
  4. Get help – Talk to a Small Business Development Center for free consulting on improving finances.

If you try these steps and still get nowhere, then it may be time to lawyer up. Just be sure to act fast while you still have leverage.

The Bottom Line

Merchant cash advances can quickly become a nightmare. If you feel trapped or believe you were defrauded, a skilled MCA attorney may be able to get you relief. But lawyers come at a cost. For less egregious cases, try negotiating directly or refinancing first. And whatever you do, act quickly before options disappear.

With the right help, whether legal or financial, you can find a way out and get your business back on track. Don’t go it alone. You got this!

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