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So, you took out a merchant cash advance (MCA) for your business. And now, you’re drowning in debt, with daily or weekly payments eating up your cash flow. You’re not alone. MCAs can seem like a lifeline when you need fast funding, but their sky-high fees and aggressive repayment terms often do more harm than good.But here’s the thing: you have options. At Delancey Street, we specialize in helping businesses escape the grip of predatory MCAs. In this guide, we’ll walk you through actionable strategies to get out of paying a merchant cash advance, from debt consolidation to legal defenses.

Understanding Merchant Cash Advances

First, let’s break down how MCAs work. When you take out a merchant cash advance, the funder gives you a lump sum of cash upfront. In exchange, they take a percentage of your daily credit card sales until the advance plus their fees are paid back.The problem? Those fees are often equivalent to triple-digit APRs. And since repayment is tied to your sales, a slow month means you’re stuck paying even longer. It’s a vicious cycle that can quickly drain your business dry.

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Consolidate Your MCA Debt

One way to make your MCA more manageable is to consolidate the debt with a term loan. The idea is simple: you take out a new loan with a lower interest rate and longer repayment term, then use those funds to pay off your merchant cash advance.This can lower your monthly payments and give you breathing room. Plus, term loans often have fixed payments, so you know exactly what you owe each month. No more daily withdrawals fluctuating with your sales.The key is finding a reputable lender who understands your situation. At Delancey Street, we can help you explore debt consolidation options and find a solution that fits your business.

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Renegotiate Your MCA Terms

Don’t assume your MCA agreement is set in stone. Many funders are willing to renegotiate terms, especially if it means getting paid back at all.Here are some changes you can request:

  • Lower the daily repayment percentage
  • Extend the repayment term
  • Defer payments temporarily if you’re in a cash crunch
  • Settle the debt for a lump sum that’s less than the full balance

The funder may ask for updated financial statements or projections to evaluate your request. Be prepared to make your case and show how renegotiating will help you repay them successfully.

Pivot Your Payment Processing

Another tactic is to minimize the impact of MCA repayments on your cash flow. Since merchant cash advances are repaid through a percentage of your credit card sales, you can strategically adjust how you process payments.For example, you could:

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  • Encourage customers to pay in cash or check instead of credit cards
  • Route credit card payments through a new processor not tied to your MCA
  • Use a separate bank account for credit card deposits

The goal is to maintain enough cash flow to keep your business running while you deal with the MCA. Just be careful not to violate the terms of your agreement, which may require you to process payments a certain way.

Assert Legal Defenses

Depending on the circumstances, you may have legal grounds to challenge the validity of your MCA agreement. Merchant cash advances operate in a gray area of the law, and some funders use questionable tactics that may not hold up in court.Potential defenses include:

  • The MCA is actually a disguised loan with illegally high interest rates
  • The funder engaged in false advertising or misrepresentation
  • The repayment terms are unconscionable or place an undue hardship on the business
  • The funder violated fair lending laws or regulations
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Asserting legal defenses often means going to court, which can be a lengthy and expensive process. But in some cases, it may be the best way to get out of an MCA that’s bleeding your business dry.At Delancey Street, our debt relief attorneys can review your MCA agreement and advise you of your legal options. We know how to stand up to predatory funders and protect your rights.

Explore Bankruptcy

In extreme cases, filing for bankruptcy may be the only way to escape an MCA that’s dragging your business under. Bankruptcy can provide a fresh start by wiping out unsecured debts, including merchant cash advances.But bankruptcy is a serious decision with long-lasting consequences. It will damage your credit and may make it harder to borrow in the future. Plus, not all debts can be discharged in bankruptcy, such as taxes and secured loans.Before considering bankruptcy, exhaust all other options and consult with a qualified bankruptcy attorney. They can help you weigh the pros and cons and determine if it’s the right choice for your business.

The Bottom Line

Merchant cash advances can be a tempting quick fix, but they often cause more problems than they solve. If you’re struggling to keep up with MCA payments, know that you have options to get out of the debt trap.At Delancey Street, we’ve helped countless businesses find relief from predatory MCAs. Our debt relief specialists can review your situation and recommend the best strategy for your unique needs, whether that’s debt consolidation, renegotiation, legal action, or bankruptcy.

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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.

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