How to Get Out of a Merchant Cash Advance: 10 Strategic Ways
You’re here because you need help. You took out a merchant cash advance (MCA) for your business, and now you’re drowning in debt. The daily payments are crushing your cash flow, and you don’t know how to escape.Don’t panic. You have options. At Spodek Law Group, we’ve helped countless clients in your exact situation. We know how to get you out of this mess, and back on track.Here are 10 proven strategies to stop paying your MCA:
1. Negotiate with Your MCA Provider
Your first move? Call up your MCA company, and try to renegotiate the terms. You’d be surprised how often this works. They want their money back, so they’re often willing to adjust the repayment schedule or amount to make it more manageable for you.Tips for negotiating:
-- Be honest about your financial situation
- Have a realistic repayment plan ready
- Stay calm and professional
- Get any agreement in writing
2. Refinance the Debt
If negotiation fails, look into refinancing your MCA debt with a traditional business loan. You’ll get better terms and lower interest rates. This can make repayment much more affordable.Refinancing options:
| Loan Type | Typical APR | Repayment Terms |
|---|---|---|
| SBA Loan | 6-13% | 5-25 years |
| Term Loan | 7-30% | 1-5 years |
| Business Line of Credit | 7-25% | 6 months-5 years |
3. Boost Your Revenue
Sometimes, the best defense is a good offense. If you can increase your business income, you’ll have more cash to put towards your MCA payments.Ways to drive revenue:
- Launch a new product or service
- Ramp up marketing efforts
- Raise prices
- Cut unnecessary expenses
4. Settle the Debt
Is your MCA in default? You might be able to settle the debt for less than you owe. Debt settlement companies negotiate with your creditors to reduce your balance. You pay the settlement amount, and the rest is forgiven.How debt settlement works:
- You stop making payments to your creditors
- Funds accumulate in a savings account
- Debt settler negotiates with creditors
- You pay the agreed settlement amount
- Remaining debt is discharged
5. File for Bankruptcy
If all else fails, bankruptcy can eliminate your MCA debt. Chapter 7 will discharge it completely, while Chapter 11 or 13 will set up a repayment plan.Pros of bankruptcy:
-- Erases unsecured debts like MCAs
- Halts collections and lawsuits
- Gives you a fresh financial start
Cons of bankruptcy:
- Damages your credit score
- Can be expensive in filing fees
- Doesn’t eliminate all debts
- May forfeit some assets
6. Utilize a Debt Management Plan
A debt management plan (DMP) rolls all your debts into one monthly payment. Credit counseling agencies work with your creditors to lower interest rates and fees. You make one affordable payment to the agency, which distributes funds to your creditors.Benefits of a DMP:
- Simplified debt repayment
- Lower interest and fees
- Can help avoid bankruptcy
- Builds positive payment history
7. Seek Legal Counsel
MCA agreements are complex, with lots of fine print. Consult with an attorney who specializes in MCA debt relief. They can review your contract, advise you of your rights, and represent you in negotiations or litigation.What an MCA attorney can do:
- Analyze your agreement for legal violations
- Negotiate with MCA providers on your behalf
- Defend you in court if sued by creditors
- Advise on debt relief options like bankruptcy
8. Consider Debt Consolidation
Similar to refinancing, debt consolidation combines all your debts into one loan with a lower interest rate. This can make repayment simpler and cheaper.Debt consolidation loan types:
- Personal loans
- Balance transfer credit cards
- Home equity loans or lines of credit
- 401(k) loans
9. Explore Government Debt Relief Programs
Depending on your location and industry, you may qualify for government debt relief programs. These can provide low-interest loans, grants, or other assistance to help you repay your debts.Examples of government debt relief:
-- SBA disaster loans
- USDA business and industry loan guarantees
- State and local economic development programs
- Industry-specific relief funds
10. Implement a Debt Snowball or Avalanche Plan
If you have multiple debts, the debt snowball or avalanche method can help you pay them off strategically.With the debt snowball, you:
- List debts from smallest to largest balance
- Make minimum payments on all except the smallest
- Put extra funds towards the smallest until paid off
- Repeat with the next smallest debt
The debt avalanche is similar, but you:
- List debts from highest to lowest interest rate
- Make minimum payments on all except the highest rate
- Put extra funds towards the highest rate until paid off
- Repeat with the next highest rate debt
Both methods can help you build momentum and motivation as you eliminate debts one by one.
-Get MCA Debt Relief Today
At Spodek Law Group, we understand the stress and challenges of MCA debt. But you don’t have to face this alone. Our experienced attorneys are here to help you every step of the way.We’ll work tirelessly to find the best solution for your unique situation, whether that’s negotiation, settlement, consolidation, or bankruptcy. We’ll fight to protect your rights and get you the relief you deserve.