Delaware Merchant Cash Advance Legal Help
Merchant cash advances can be a helpful source of funding for small businesses in Delaware, but they also come with legal risks. If you’ve taken out a merchant cash advance and are facing legal issues, there are attorneys in Delaware who can help.
Understanding Merchant Cash Advances
A merchant cash advance (MCA) is a form of business financing where a company purchases a portion of your future credit card sales. You receive an upfront lump sum, and the MCA company takes a fixed percentage of your daily credit card receipts until the balance has been repaid (plus fees and interest).Unlike a small business loan, an MCA does not come with a fixed monthly payment or set repayment period. The daily payments fluctuate based on your credit card sales volume.
-Common Legal Issues with Merchant Cash Advances
While MCAs can provide quick access to capital, they also come with a number of potential legal pitfalls, including:
- Breach of contract – If you violate any terms of your MCA agreement, the funder can sue you for breach of contract. Common triggers include missing payments, providing inaccurate sales data, or going out of business.
- Deceptive claims – Some MCA companies engage in predatory behavior, such as misleading statements about costs, consequences of default, and more. This may violate state and federal consumer protection laws.
- Unconscionable contract terms – MCA contracts sometimes contain harsh default clauses, personal guaranties, daily repayment requirements that exceed reasonable percentage-of-sales thresholds, and other unreasonably unfavorable provisions.
- Confessions of judgement – Many MCA agreements require you to sign a confession permitting the funder to obtain a judgement without notice or hearing. This can allow the MCA company to freeze bank accounts or garnish wages.
- Usury violations – Depending on the structure, MCA transactions may violate state usury laws regarding maximum allowable interest rates.
Getting Legal Help for Your MCA Issues
If you are facing any legal issues related to a merchant cash advance in Delaware, it is advisable to consult with an attorney regarding your options. An attorney can review your MCA contract, assess any potential violations, and represent you in negotiations or litigation with the funder.There are a number of law firms and consumer protection legal groups in Delaware that assist small business owners with MCA disputes, including:
- Avvo – Directory of local lawyers by practice area
- Gibbons P.C. – Prominent regional firm with attorneys experienced in MCA litigation
- FindLaw – Allows you to search for MCA lawyers by location
- Delaware Volunteer Legal Services – Provides pro bono legal services for low income individuals
- Delaware Bankruptcy Legal Center – Can assist with MCA-related financial distress
Defenses and Claims in MCA Disputes
There are a number of defenses and counterclaims that your attorney may raise to fight an MCA lawsuit or stop abusive collection efforts, including:Unconscionability – Argue that the contract terms grossly favor the MCA company and there was unequal bargaining power.Usury violations – Allege the MCA rates and fees exceed Delaware’s legal limits.Deceptive trade practices – File a counterclaim under state consumer protection laws regarding false statements made by the MCA representative.Confession of judgement – Ask the court to vacate a confession of judgement on the grounds that you were not aware of the implications.Breach of covenant of good faith & fair dealing – Claim the MCA company acted unfairly or dishonestly in managing the agreement.Invalid personal guarantee – Assert any personal guarantees you signed are unenforceable for various legal reasons.Inadequate account data – Argue the MCA company failed to provide clear statements and accounting of the amounts owed.The specific claims depend on the facts of your case, but an experienced attorney can help craft a defense strategy and negotiate a settlement. Acting quickly is advisable before the MCA company is able take aggressive collection actions.
What to Expect in MCA Litigation
If negotiations fail and a lawsuit is filed, there are a few things you can expect as the legal process unfolds:
-- The MCA company will likely file suit in Delaware state court rather than federal court. However, if the parties are located in different states, it may be filed in federal court.
- Typical claims brought by MCA companies include breach of contract, account stated, and unjust enrichment. They may also make allegations of fraud.
- Your attorney will likely raise a number of affirmative defenses in your answer to the complaint, and possibly counterclaims under consumer protection laws.
- Discovery will include depositions, written interrogatories, and requests to produce documents related to the MCA agreement and your business finances.
- If no settlement is reached, the court will schedule a trial date where both sides present evidence and examine witnesses. In a “bench trial,” the judge will decide. For a “jury trial,” the jury will determine liability and damages.
Litigation can be expensive, time-consuming, and unpredictable. In many cases, it is in both parties’ interests to reach an out-of-court compromise. An experienced attorney can advise you on the pros and cons of settlement versus continued litigation.
Finding the Right Lawyer for Your MCA Case
If you need an attorney to help resolve an issue with a merchant cash advance in Delaware, make sure to vet several options and find someone who meets the following criteria:
- Knowledgeable about MCAs – They should have working experience with how merchant cash advances operate, common disputes, and legal strategies.
- Familiar with Delaware law – They must understand the consumer protection, usury, contract, guaranty, and other state laws that may apply.
- Willing to litigate – If negotiations fail, the attorney must be prepared and qualified to take the case to court.
- Check disciplinary history – Use the Delaware Bar Association website to confirm the lawyer is in good standing and has no serious complaints.
- Personable and responsive – Make sure you choose someone who is readily available to answer your calls and emails. You want an attorney who makes you feel comfortable and gives your case proper attention.
By finding the right legal help, you can better defend yourself against aggressive collections by predatory merchant cash advance companies. Don’t hesitate to schedule consultations with attorneys in your area until you find one who meets your needs.