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Merchant Cash Advance Attorney: A Helpful Guide for Small Businesses

Merchant cash advances (MCAs) have become an increasingly popular form of alternative financing for small businesses in recent years. Unlike traditional bank loans, MCAs provide fast access to capital without requiring strong credit or collateral. However, MCAs are largely unregulated and can quickly spiral into a cycle of debt for struggling business owners. If you’re dealing with legal issues related to merchant cash advance debt, hiring an attorney experienced in this area can help protect your business. This guide will provide an overview of MCAs, discuss when you may need to hire legal help, and offer tips for finding the right MCA attorney.

What is a Merchant Cash Advance?

A merchant cash advance is a form of financing where a company purchases a portion of your future credit card or debit card sales. It works like this:

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  • You apply for financing and agree to sell a percentage of your future credit card receivables to the MCA company, often ranging from 10-20%
  • The MCA company provides you with a lump sum upfront, typically $5,000 – $500,000
  • You repay the advance through daily or weekly debits from your credit card processing account
  • The total amount you repay includes the original advance plus a fee, often equivalent to an annualized interest rate of 60-300%

MCAs are not considered loans since the MCA company is technically buying your future receivables. This allows providers to skirt state usury laws that cap interest rates on loans. It also means MCAs are largely unregulated compared to traditional small business financing options.While MCAs provide fast access to capital, the extremely high repayment rates and daily/weekly payment schedule can put significant strain on a business’s cash flow. This often creates a debt spiral, where businesses take out additional MCAs just to repay existing ones.

When to Hire a Merchant Cash Advance Attorney

If you’re struggling to repay an MCA, it may be time to seek legal help. Here are some common situations where hiring an attorney can help:

You’re Facing a Lawsuit

One of the most aggressive tactics used by MCA companies is filing lawsuits against merchants who fall behind on payments. They may sue for breach of contract and attempt to obtain a default judgment if you fail to respond. An attorney experienced in MCA debt can defend you in court and fight any unfair contract terms.

There is a UCC Lien on Your Business

MCA companies will often secure the advance by filing a UCC lien against your business assets. This gives them the right to seize inventory, equipment, bank accounts, and accounts receivable if you default. An attorney can help remove improper liens and stop any attempts to freeze your assets or accounts.

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You Need to Restructure or Settle Your MCA Debt

If the high repayment rates are putting too much strain on your finances, an attorney can negotiate new terms or a settlement with the MCA provider. This may involve lowering payments, extending the repayment term, or agreeing on a lump sum discounted payoff amount.

You Want to Pursue Legal Action Against the MCA Company

In some cases, attorneys have successfully filed countersuits against MCA providers for predatory lending or violating state laws. If you believe the provider used deceptive tactics or your contract contains illegal terms, an attorney can assess if you have grounds to pursue legal action.

Tips for Finding the Right MCA Attorney

Not all attorneys have experience dealing with MCA debt cases. Here are some tips for finding one with the right expertise:

  • Search for attorneys who specialize in MCA debt relief or defense. Look for phrases like “merchant cash advance attorney” or “MCA debt lawyer” in online profiles.
  • Choose an attorney familiar with your state’s laws. Regulations around MCAs can vary, so it helps to find someone well-versed in your jurisdiction.
  • Look for lawyers who are members of relevant professional organizations. For example, the Commercial Law League of America has a section dedicated to MCA issues.
  • Read online reviews and check credentials. Be sure to vet any attorney thoroughly before hiring them. Look for things like years of experience, peer recognition, and a strong track record with MCA cases.
  • Schedule a consultation. Most attorneys offer free initial consultations. This lets you discuss your case specifics and get a feel for their expertise before committing.
  • Understand fee structures. Attorneys may charge hourly, flat fees, or contingency fees based on debt relief obtained. Get all pricing details upfront so there are no surprises.
  • Ask plenty of questions. Don’t be afraid to interview multiple attorneys to find the best fit for your situation and budget.

What Can a Merchant Cash Advance Attorney Do For You?

Hiring an attorney experienced with MCA debt early on can help save your business time, money, and frustration in the long run. Some of the key ways a knowledgeable lawyer can assist include:

  • Reviewing your MCA contract for potential violations of state laws regarding usury, lending practices, interest rate caps, or improper terms.
  • Communicating with MCA providers to stop harassment from collectors, restructure unsustainable repayment terms, or negotiate debt relief.
  • Defending against lawsuits by contesting improper service of process, inaccurate claims, and unfair contract provisions.
  • Removing UCC liens and levies so you maintain control of your assets and accounts.
  • Pursuing legal action against predatory MCA companies through countersuits, class actions, or complaints to regulators.
  • Managing bankruptcy filings, if necessary, to eliminate or restructure MCA debt and protect your business.
  • Overseeing debt settlement by negotiating agreeable lump sum payoffs at a fraction of what you owe.
  • Providing alternatives like business debt restructuring, credit repair, and accessing more affordable financing.

The right attorney can assess your situation, explain your rights and options, and take over communications with MCA providers – allowing you to focus on operating your business. With an experienced lawyer on your side, you can gain leverage in negotiating better repayment terms or debt relief.

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Beware of MCA Debt Settlement Companies

When researching options for dealing with MCA debt, you may come across companies offering debt settlement or consolidation services. While this can seem like an affordable alternative to hiring an attorney, these companies have some significant drawbacks:

  • They charge very high upfront fees, often thousands of dollars, that eat into any potential savings.
  • Most are not licensed to provide legal counsel or represent you in court if sued.
  • They can take months to begin negotiations or accumulate enough funds to settle debts.
  • You have little recourse if they fail to deliver on promised outcomes.
  • Any funds you provide are at risk if the company closes down or loses its escrow account.

For these reasons, you are usually better off working directly with an attorney rather than an unregulated debt settlement company. Attorneys have ethical and legal obligations to act in your best interest. And they can provide immediate legal protection while working on long-term debt relief.

Consult an Attorney as Soon as Possible

Dealing with MCA debt can be an overwhelming and stressful situation. But you don’t have to tackle it alone. Consulting an attorney experienced in MCA relief at the first signs of trouble can help defend your business and provide options beyond just paying what the MCA companies demand. Don’t wait until you are facing a lawsuit or collection actions. Schedule a consultation with a qualified lawyer to discuss your situation and develop an informed strategy. With the right legal guidance, you can find a resolution that reduces the burden of MCA debt and protects the future of your business.

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