California Merchant Cash Advance Legal Help – Finding the Right Attorney
Merchant cash advances (MCAs) have become an increasingly popular form of alternative financing for small businesses in California. Unlike traditional bank loans, MCAs provide fast access to capital by allowing businesses to borrow against future credit card sales.However, MCA loans come with risks. Their high fees and short repayment periods can put extreme financial pressure on borrowers. And if you fall behind on payments, some MCA lenders will aggressively pursue legal action to collect.That’s why it’s critical to understand your rights under California law – and know when to contact an experienced merchant cash advance attorney for help.
How Merchant Cash Advances Work
With a merchant cash advance, a lender provides you an upfront lump sum of capital in exchange for a fixed percentage of your future credit card and debit card sales.You make payments each day or week until the advance is fully paid off, typically within 6-18 months. The amount due fluctuates based on your sales volume.The key legal distinction is that MCAs technically are not considered loans under California law. Instead, the transactions are structured as purchases of future sales at a discount.However, make no mistake – you are still on the hook to pay back the full amount plus very high fees that act like interest charges. Effective APRs often exceed 60-300% when you calculate the total cost of repayment.
-Common Legal Issues Facing MCA Borrowers
While MCAs give you quick access to funding, they come with major downsides for your business. Their extremely high costs and aggressive collection tactics can lead to financial and legal headaches.Here are some of the most common issues California small business owners face:
- Unaffordable Payments – MCA payments are usually structured as a percentage of daily or weekly credit card sales. This fluctuating structure makes it hard to budget. And if your revenue dips, you get squeezed immediately.
- Harassment From Collectors – When you fall behind on payments, many MCA lenders unleash aggressive collections departments that barrage you with calls and letters.
- Lawsuits & Judgments – Defaulting on an MCA can prompt the lender to hit you with a lawsuit and obtain legal judgments against your business assets and personal finances.
- Frozen Bank Accounts – Some MCA lenders abuse the court system to get injunctions that freeze your bank accounts, garnish wages, and even attempt to seize assets.
- Confessions of Judgement – Shady MCA companies may pressure you to sign a “Confession of Judgement” that allows them to obtain a judgement without even giving you a chance to respond in court.
- Incorrect/Inflated Payoff Amounts – When trying to settle or pay off MCA debt, lenders sometimes provide payoff quotes that are higher than what you actually owe.
Having an experienced attorney review your MCA agreements and represent you in legal disputes can help shield your business from the worst of these abusive tactics.
Finding the Right California MCA Attorney
If you decide to hire legal help for MCA issues, it’s critical to choose an attorney who understands these complex transactions and the hardball tactics used by some lenders.Ask these key questions when interviewing prospective lawyers:
- How much experience do you have specifically with MCA or merchant cash advance cases? Look for at least 5+ years focused on this niche area.
- Are you licensed to practice law in California state courts? Make sure they can represent you locally.
- What strategies and defenses have you used to help clients in MCA disputes? Find someone who goes beyond just reviewing contracts.
- Do you only handle pre-litigation cases, or can you provide full legal representation in lawsuits? Know what services they offer.
- What are your fees and billing structure? Get clear pricing upfront so there are no surprises.
Also research client reviews and ratings to confirm the lawyer has a proven track record of good results for previous MCA clients.
How a California MCA Attorney Can Help
Once you find qualified legal counsel, here are some of the ways an experienced merchant cash advance attorney can help protect your interests:
1. Reviewing MCA Agreements
Have your lawyer carefully review your MCA contracts to spot areas of concern like:
- Undisclosed Fees – Sometimes hidden fees are buried deep in the fine print.
- Inflated APRs – Make sure interest rates comply with California’s usury laws.
- Illegal Terms – They’ll identify clauses that violate state consumer protections.
- Errors & Omissions – Catching mistakes upfront prevents issues later.
Addressing problems at the outset gives you more leverage in disputes down the road.
2. Responding to Legal Notices
If you receive threatening notices or letters from an MCA lender, don’t panic. Notify your attorney immediately and let them handle communications going forward.The right legal response can sometimes halt collections activities and prevent escalation to a lawsuit. Or if litigation seems inevitable, early involvement from a lawyer helps you strategize and prepare your defense.
3. Negotiating Settlements
Your attorney can negotiate directly with MCA lenders to settle your outstanding balance for less than you owe. Often 40-60% discounts off the payoff amount are possible.They can also try to get the most onerous contract terms removed so payments become more affordable. This may allow you to resume making payments rather than defaulting.
4. Defending & Settling Lawsuits
If an MCA lender does file a lawsuit over contract breaches or non-payment, your lawyer can put up a vigorous defense. They understand what evidence and legal arguments work best for these cases.Many MCA lawsuits do end in settlements, which your attorney can negotiate to minimize the financial impact on your business. They’ll fight to get lawsuits dismissed entirely or judgments vacated whenever possible.
5. Navigating Bankruptcy
As a last resort, filing business bankruptcy may be the most viable option to eliminate suffocating MCA debt payments and collection harassment.Experienced bankruptcy attorneys can advise if your circumstances qualify for Chapter 7 or Chapter 11 protection. This stops collections activity while the debts are restructured or discharged.
Finding the Right Solution for Your Situation
If you’re struggling with merchant cash advance debts and aggressive collections, know that help is available. California law provides important consumer protections around these financing products.And an experienced MCA attorney can be invaluable in defending your interests. From reviewing contracts upfront to negotiating settlements to defending lawsuits, they have the specialized legal knowledge to protect your business.Don’t wait to seek help if you face legal action from an MCA lender or simply can’t keep up with payments. Reach out for a free consultation so you fully understand all your options. The sooner you involve an attorney, the better the chances of preventing further damage.With the right help, many small business owners do find solutions – either repaying debts on more affordable terms or discharging obligations completely. There are ways forward, even when MCA debts feel crushing.