Merchant Cash Advance Attorney Rhode Island
If you are a business owner in Rhode Island who has entered into a merchant cash advance agreement, you may benefit from consulting with a merchant cash advance attorney. Merchant cash advances can provide quick access to capital, but the terms are often less favorable than traditional business loans. An experienced attorney can help you understand your rights and responsibilities under the agreement.
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is a form of business financing where a company purchases a portion of your future credit card sales or revenue in exchange for an upfront lump sum payment. It is not technically a loan, so MCA companies can bypass state lending laws and charge higher fees and rates. The amount advanced is generally based on your average monthly credit card volume and the payback comes from a fixed percentage of your daily credit card receipts.
-While merchant cash advances provide fast access to capital, they often come with high costs. Unlike a term loan, there is no fixed repayment schedule. The payback period depends on your credit card volume – the faster your business generates sales, the quicker you pay back the advance. There are usually no limits on the total amount you end up repaying and the annualized interest equivalent can exceed 100% APR.
Common MCA Agreement Terms
Some key terms to understand in a typical MCA agreement include:
- Advance amount – The lump sum you receive upfront
- Fixed daily payment – A fixed percentage deducted from your daily credit card sales
- Personal guarantee – Makes you personally responsible for the debt
- Confessions of judgement – Allows the MCA company to obtain a judgement without notice
- Cross-collateralization – Gives the MCA company rights over all your assets
Potential Legal Issues
While MCAs are not loans, they share many characteristics of loans and are essentially a very expensive form of financing. As such, many MCA companies use questionable tactics that an attorney can help address, such as:
- Deceptive marketing – Misrepresenting or hiding the true costs
- Unconscionable terms – Extremely unfavorable or one-sided contract terms
- Unauthorized debits – Improperly accessing your accounts
- Not registering as lenders – Avoiding state lending laws
- Abusive collection practices – Harassment, threats, freezing accounts
Rhode Island Laws Related to MCAs
While Rhode Island does not currently regulate merchant cash advances, attorneys can leverage existing laws to protect your rights, such as:
- Usury laws – Limiting interest rates on loans under R.I. Gen. Laws § 6-26-2
- Lending laws – Requiring licensing and disclosures per R.I. Gen. Laws § 19-14.1-1 et seq.
- Consumer protection laws – Prohibiting unfair/deceptive acts under R.I. Gen. Laws § 6-13.1-1 et seq.
- Debt collection laws – Regulating collection practices per R.I. Gen. Laws § 19-14-24
Defenses and Strategies
A merchant cash advance attorney can help you raise defenses to avoid or reduce your repayment obligations. Some potential defenses include:
- The MCA agreement is actually a usurious loan in violation of state laws
- The company failed to register as a lender as required
- There was fraud in the inducement of the agreement
- The terms are unconscionable and unenforceable
- The company violated debt collection laws
In addition to defenses, attorneys can help you proactively renegotiate the terms of your agreement or pursue settlement options. They can also assist you with bankruptcy should it become necessary.
Finding a Qualified Attorney
It is important to retain an attorney experienced with merchant cash advances. Warning signs of an unqualified attorney include:
- No experience handling MCA cases
- Makes unrealistic promises or guarantees
- Charges large upfront fees
- Pressures you to make decisions quickly
Look for an attorney who provides a free initial consultation, has represented other businesses in MCA matters, outlines a clear legal strategy, and works on a contingency fee basis. You can find options through resources such as the National Association of Consumer Advocates.
Act Sooner Rather Than Later
If you are struggling with MCA debt, the sooner you consult an attorney, the more options will be available. An attorney can often negotiate better outcomes when there is still time to raise defenses before a judgement. The longer you wait, the weaker your position may become.
Don’t struggle alone with an oppressive MCA agreement – contact a qualified merchant cash advance attorney serving Rhode Island businesses today.