Navigating Merchant Cash Advance (MCA) Debt Resolution

Getting a merchant cash advance (MCA) can seem like a quick fix when your business needs money fast. Unlike a traditional bank loan, you don’t need good credit or collateral to get approved. The MCA company just advances you a lump sum of cash based on a percentage of your future credit card sales. But for many businesses, MCA debt becomes a nightmare that never seems to go away.

If you’re barely keeping your head above water trying to make the daily MCA payments on top of all your other expenses, it may be time to explore your options for getting out of this debt spiral. Don’t wait – take action now before it’s too late.

How Do Merchant Cash Advances Work?

With an MCA, the funding company essentially buys the rights to collect a fixed percentage of your future credit card receipts. For example, they may give you $100,000 upfront in exchange for 15% of your credit card sales until you pay back $150,000. There’s no set repayment schedule – the money just gets automatically debited from your merchant account daily or weekly.

This means there’s no limit to how much you could end up paying back. The more credit card sales you process, the faster you pay it back. But if sales decline, you’re still on the hook for the fixed percentage which keeps draining your accounts.

What Happens If You Default on an MCA?

Missing payments puts you in default of your MCA agreement. This allows the lender to take legal action such as:

• Filing a lawsuit against your business
• Obtaining a default judgment if you don’t respond to the lawsuit
• Freezing business and personal bank accounts
• Seizing assets like equipment or property
• Interfering with customer relationships and accounts receivable

Many MCA agreements also contain “confessions of judgment.” This means if you default, the lender can obtain a judgment against you without even giving you a chance to respond in court.

MCA Debt Relief Strategies

If you realize your MCA debts are becoming unmanageable, you need to act quickly to avoid disaster. Here are some potential options to restructure or eliminate MCA debt:

MCA Debt Consolidation

You may be able to consolidate multiple MCAs into one new agreement with lower daily repayment rates. This can provide some temporary relief, but you’ll likely end up paying much more interest over an extended term.

MCA Debt Refinancing

If you can qualify for a business loan or line of credit, you may be able to pay off the MCA at a lower interest rate. This can reduce your payments, but refinancing also extends the repayment period resulting in more interest paid.

MCA Debt Settlement

You can attempt to negotiate a lump sum settlement with your MCA lender for less than the full balance. Typical settlement amounts range from 15% to 40% of what you owe. This provides immediate debt relief, but it can be very difficult to negotiate effectively on your own.

MCA Debt Restructuring

Some MCA agreements contain mandatory “reconciliation” clauses. This requires the lender to restructure the repayment terms if you can show financial hardship. An attorney can help compel the MCA company to offer more affordable payments.

File for Bankruptcy

As a last resort, you may need to seek bankruptcy protection to discharge MCA debts. However, MCA lenders often fight hard against bankruptcy filings. An attorney is essential to navigate the complexities.

Dangers of DIY MCA Debt Settlement

Attempting to negotiate an MCA settlement yourself without experienced legal help can be very risky. Some major hazards include:

• Accepting unfavorable repayment terms that leave you still struggling
• Signing away legal rights to contest the debt in the future
• Agreeing to allow asset seizures, wage garnishment, or liens if you default again
• Failing to get all collection activity and legal action permanently halted
• Sending payment without an airtight agreement signed by the lender
• Missing deadlines that negate the settlement

Hiring an MCA Debt Attorney

To avoid the many pitfalls of negotiating your own settlement, consider hiring an attorney experienced in MCA debt relief. An attorney can help you:

• Stop collections immediately
• Review your legal options including possible defenses
• Demand mandatory reconciliation if entitled
• Negotiate the lowest possible settlement
• Make sure any agreement protects your rights
• Ensure the MCA lender terminates all legal claims against you

An MCA debt lawyer works solely in your best interest. They have the skills and experience to deal with MCA lenders and maximize your chances of eliminating these debts once and for all.

The MCA Debt Settlement Process

Here is an overview of the typical MCA debt settlement process when assisted by a knowledgeable attorney:

1. Stop collections – The attorney sends a cease and desist letter to immediately halt the MCA from debiting your accounts.
2. Review contracts – The attorney examines all MCA agreements to look for potential violations or illegal terms.
3. Send demand for reconciliation – If the MCA contracts contain mandatory reconciliation clauses, your attorney can compel the lender to offer relief.
4. Gather funds – You begin setting aside lump sum settlement funds in a separate account.
5. Submit settlement offer – The attorney presents your lump sum settlement offer with proposed terms.
6. Negotiate terms – Your attorney negotiates vigorously to get the optimal deal.
7. Get signed agreement – The attorney ensures the MCA lender signs the settlement contract before you pay anything.
8. Make payment – You pay the agreed settlement amount to satisfy the debt.
9. Obtain proof of settlement – Your attorney secures documentation that the MCA debt is paid and closed.

What Settlement Amount Can You Expect?

There is no standard discount you can expect when settling MCA debt. The savings depend on factors like:

• Total amount owed
• Your current financial situation
• Ability to pay a lump sum
• Protections you may lack in the MCA contract
• How long the MCA has been in default

In general, most businesses can settle their MCA debts for between 15% to 40% of the balance. Some key steps you can take to aim for the lowest settlement include:

• Stop making monthly payments as leverage
• Build up a lump sum in a separate account
• Work with an attorney experienced in MCA settlements
• Highlight reasons why litigation would be risky for the lender
• Start negotiations high to anchor expectations
• Make slow concessions and stand firm on key terms

Other Business Debt Relief Options

If you have other debts like business loans Here is a 3000 word article on Merchant Cash Advance (MCA) Debt Resolution:

Navigating Merchant Cash Advance (MCA) Debt Resolution

Getting a merchant cash advance (MCA) can seem like a quick fix when your business needs money fast. Unlike a traditional bank loan, you don’t need good credit or collateral to get approved. The MCA company just advances you a lump sum of cash based on a percentage of your future credit card sales. But for many businesses, MCA debt becomes a nightmare that never seems to go away.

If you’re barely keeping your head above water trying to make the daily MCA payments on top of all your other expenses, it may be time to explore your options for getting out of this debt spiral. Don’t wait – take action now before things get worse. Here’s what you need to know about merchant cash advance debt resolution.

How Do Merchant Cash Advances Work?

First, it helps to understand what you got yourself into. An MCA company purchases a portion of your future credit card receipts at a discount. For example, they may give you $100,000 upfront in exchange for collecting 15% of your credit card sales until $150,000 is repaid. There’s no set repayment period – the MCA company just keeps taking their cut every day via automatic withdrawals from your bank account.

This can equate to extremely high effective interest rates of 200% or more when annualized. And if your credit card sales drop, the MCA company may increase the percentage they’re taking to recoup their investment faster.

What Happens If You Default on an MCA?

If you fall too far behind on payments, you go into default. This allows the MCA company to take legal action such as:

• Filing a lawsuit against your business
• Obtaining a default judgment if you don’t respond
• Attempting to seize your business assets and personal assets
• Contacting your customers about assuming the MCA debt
• Freezing your business and personal bank accounts

As you can see, defaulting on an MCA can spiral out of control quickly. The consequences spread beyond just your business finances. Your personal assets may be pursued as well, depending on what kind of guarantee you signed.

Should You Keep Making MCA Payments?

Once you realize the MCA payments are becoming unmanageable, your instinct may be to at least pay something each month. But this rarely makes the problem go away. MCA companies are under no obligation to accept partial or reduced payments.

Instead, any money you pay just goes toward their bottom line. It doesn’t improve your standing or lead to any kind of settlement. You end up throwing good money after bad.

A better strategy is to stop making payments to the MCA company entirely. Open a separate bank account and start setting aside any extra funds to save up for a settlement offer. This gives you leverage in negotiating a discount on what you owe.

What Legal Protections Do You Have?

Before attempting to settle, it’s important to understand your legal rights and potential defenses. According to Investopedia, margin requirements protect investors by mandating a minimum amount of equity in an account[1]. Similarly, MCA contracts may contain provisions requiring the lender to offer relief if you face financial hardship. An experienced attorney can review your agreements to identify any protections you can invoke.