Phoenix Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances can be a great financing option for small businesses, but they also come with legal risks. If your business has taken out a merchant cash advance and is now facing legal issues or debt problems, don’t panic. Help is available.
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).MCAs are not considered loans under the law, so they are mostly unregulated. This gives MCA companies a lot of leeway to set their own terms and conditions. And those terms are often unfavorable for the business.For example, MCA contracts can have extremely high effective interest rates north of 100% APR. They may also include aggressive daily repayment requirements and harsh penalties for late payments.
-Common Legal Issues with Merchant Cash Advances
With so little legal oversight, MCA companies frequently engage in predatory practices that catch business owners off guard. Some common issues include:
- Deceptive marketing: MCA companies may misrepresent or omit key details about rates, fees, and repayment terms in their advertising. This convinces business owners to sign contracts they don’t fully understand.
- Breach of contract: MCA companies often make it impossible to repay on schedule. They may “stack” multiple MCA deals without the business’s consent, or manipulate daily payments beyond what was agreed.
- Unfair debt collection: MCA companies can freeze bank accounts, force businesses to close, or threaten legal action over minor contract breaches. Their collection tactics are often far more aggressive than what would be allowed for regulated lenders.
- Violations of lending laws: Some states have laws, like usury caps on interest rates, that can make MCA deals illegal. But MCA companies frequently ignore these consumer protections.
Getting Legal Help for Your Merchant Cash Advance
If you’re facing any of the above issues—or are simply overwhelmed by your MCA burden—it’s important to consult a lawyer. An experienced legal team can help in several ways:
- Reviewing your MCA contract for potential violations of state laws and lending regulations
- Negotiating with MCA companies to reduce payments or settle balances
- Defending against lawsuits over alleged contract breaches
- Filing complaints about predatory lending practices with regulators
- Managing bankruptcy if the debt burden becomes unsustainable
Reputable law firms like Avvo, LawInfo, and FindLaw have attorneys well-versed in merchant cash advance issues who can provide tailored guidance for your situation.
Strategies for Settling MCA Debt
If your business simply cannot keep up with merchant cash advance payments, your best option is often to negotiate a settlement. This involves paying the MCA company a lump-sum that is less than what you owe in exchange for wiping out the debt.An experienced lawyer can employ proven strategies to secure the best possible settlement, such as:
-- Highlighting legal or regulatory violations – If the MCA contract violates state laws, this gives you leverage to push for a discount.
- Freezing payments temporarily – Stopping daily payments puts pressure on the MCA company to come to the table.
- Threatening bankruptcy – Make it clear you will pursue bankruptcy if a reasonable settlement isn’t reached.
- Offering to pay in full – Proposing to pay the original cash advance in full (without fees/interest) can appeal to MCA companies.
- Getting investors involved – Outside investors may offer cash infusions to pay settlements on your behalf.
Settlements often resolve MCA debt for 60 cents on the dollar or less. And the agreements usually include legal releases protecting you from future collections or lawsuits.
What to Expect in MCA Litigation
If merchant cash advance companies sue your business over the debt, it’s imperative to work with legal counsel on your defense. Some aspects of the litigation process to expect include:
Pleadings Stage
This involves the initial filings with the court—the complaint by the plaintiff (MCA company) and your answer/counterclaims as the defendant:
- Complaint – The MCA company must prove your business breached the contract and owes damages.
- Answer – Your response admitting or denying allegations, plus asserting affirmative defenses.
- Counterclaims – Your allegations against the MCA company, e.g. predatory lending.
Discovery Stage
This formal information exchange helps develop evidence for trial:
- Document requests – You must produce financial records, MCA contract, communications with plaintiff, etc.
- Depositions – Sworn out-of-court testimony from parties and witnesses.
- Interrogatories – Written questions you and plaintiff must answer under oath.
Dispositive Motions
These request judgments before a full trial based on alleged lack of evidence:
-- Motion to dismiss – Argues the complaint fails to state an actionable claim.
- Motion for summary judgment – Asserts undisputed material facts warrant a judgment.
Settlement Talks
Most cases settle before trial due to the time and expense involved. Settlement negotiations can continue throughout litigation.
Trial
If no settlement is reached, the court or jury hears arguments and weighs evidence before issuing a final verdict.Having a trusted attorney in your corner for every phase allows you to put up the strongest fight possible against predatory MCA companies.
Don’t Face Merchant Cash Advance Issues Alone
Dealing with merchant cash advance legal troubles or overwhelming debt can be extremely daunting for small business owners. But the financial and legal experts at Delancey Street are here to help lighten the burden.Our team can provide guidance on your rights and defenses, negotiate settlements on your behalf, and assist with damage control if lawsuits are filed. We offer empathetic support each step of the way—taking the stress off your shoulders so you can focus on keeping your business afloat.If merchant cash advances have become an unbearable weight, contact us today to discuss your confidential situation at no charge. Help is just a phone call away.
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