Merchant Loan Debt
Merchant loans, specifically merchant cash advances (MCAs), are short-term financing solutions provided to businesses that need immediate funds. These advances are typically repaid through a fixed percentage of your daily or weekly credit card sales. Business owners often turn to merchant cash advance lenders for quick capital to cover urgent expenses, expand operations, or navigate cash flow challenges. However, while MCAs offer rapid access to cash, the debt from these advances can quickly accumulate, often leading to overwhelming repayment terms.
Many entrepreneurs find themselves trapped in a cycle where the constant pressure of daily or weekly payments leaves little room for breathing. The upfront ease of obtaining an MCA can mask the long-term financial burden it imposes. As experienced merchant cash advance attorneys at McCarthy Law, we know firsthand how this type of debt can sneak up on you, making your initial financial relief a future financial strain. Our goal is to help you understand your options and provide a pathway to MCA debt relief.
Merchant Loan Debt Simplified
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Merchant cash advances may seem like a financial lifeline for small business owners, but these loans come with a high cost.
Merchant cash advances are a quick and easy way for small businesses to obtain funds. However, they have high interest rates and unsustainable repayment schedules. Research further shows that the annual percentage rate (APR) for most of these advances is between 40% and 350%. This can be a debt trap for many small business owners.
How Long Do I Have to Pay Back the Advance?
The repayment period for a typical merchant cash advance varies and depends largely on the agreement with your merchant cash advance lender. Generally, repayment occurs over a short, fixed period, often between three to twelve months. Unlike traditional loans with set monthly payments, MCAs require daily or weekly payments directly from your business bank accounts. This method may seem manageable at first but can severely impact your cash flow in the long run.
The constant deduction from your sales revenue can make covering other essential business expenses difficult, leading to further financial stress. In some cases, the high cost of borrowing, reflected in exorbitant interest rates and fees, can extend the repayment timeline indefinitely. It’s crucial to carefully review the terms of your MCA agreement to understand the true cost and duration of the advance. Should you find yourself struggling with the repayment structure, our MCA debt relief lawyers can negotiate more favorable terms or alternative solutions to ease your burden.
Our law firm has experience dealing with merchant cash advance companies and the intricacies of these financial products. We guide you through the entire process, offering sound advice and strategic counsel to help you manage your MCA debt effectively. With us on your side, you can regain control of your finances and focus on running your business effectively.
Additional Pitfalls of Taking a Merchant Cash Advance
- Phone Calls: Be ready for additional phone calls from brokers. “Stacking” is an unfortunate side effect of the MCA industry. After a lien has been placed on you and your business, this information becomes publicly available after a period of time. From here, lists are created and sold to brokers, who will contact you and see if you need additional funds.
- Credit Pulls: Although online lending has created an efficient and streamlined process, there are drawbacks. When you fill out an application, there is a chance your personal credit report is being pulled. Be wary of comparison shopping. Unsuspecting consumers think they are researching different options only to find out their personal credit report is being pulled. Multiple credit reports pulled within a short time frame can negatively impact a person’s credit rating.
- APR: As stated above, APRs on advances are extremely high. Even though this industry has become competitive, most of these APRs on advances are still in the range of 40% – 350% for APRs.
Have you worked with any of these companies?
| 1st Global Capital | itria Ventures LLC | Quarterspot |
| Accord Business Funding | Kabbage | Queen Funding LLC |
| Ace Funding Source | Kash Capital | Quick Fix Capital |
| ADVANCE MERCHANT SERVICES, LLC | Lendini | Quicksilver Capital |
| Advantage Capital Lending | LG Funding, LLC | Rapid Advance |
| BFS Capital | Loan Builder | Roc Funding Group |
| CAN Capital | Mantis | Shizoom |
| Cascade Orthopedics | ML Factors | Silverline Service |
| Colonial Funding | MULLIGAN FUNDING,LLC | SPG Advance LLC |
| Credibly (Retail Capital) | Nextwave Enterprises, LLC | Strategic Funding Source, Inc. (SFS) |
| Dealstruck | Oceans 1212 | Swift Capital |
| Forward Finanacing LLC | On Deck Capital | The Smarter Merchant |
| Fox Capital Group, Inc (FCG) | Orange Advance | Thryve Capital Funding LLC |
| Fundkite Funding | Paladin Capital Services Inc. | Total Enrolled Debt |
| GLD Factoring | Pearl capital | Vader Servicing LLC |
| Green Capital Funding | PIRS Capital | Vital Cap Fund (Emerald Group Holdings LLC) |
| High Speed Capital | Platinum Rapid Funding Group LTD. | Web Bank |
| IOU Central Inc. (IOU Financial) | Priority Funding | Wise Funding Group |
What Happens if I Default on My Merchant Cash Advance?
Defaulting on a merchant cash advance can have serious repercussions. When you default, it means you’ve failed to make the required daily or weekly payments as agreed upon in your contract. This can trigger a chain reaction, starting with aggressive collection efforts by the merchant cash advance lenders. They may employ tactics such as withdrawing larger amounts from your business bank accounts or pursuing legal actions like a merchant cash advance lawsuit to recover their money.
The immediate impact of defaulting includes strained business operations due to depleted cash flow and the potential for additional fees and penalties. Moreover, defaulting can damage your business credit score, making it harder to secure future financing. Some MCA agreements include provisions that allow lenders to seize personal assets, which heightens the risk for business owners who have provided personal guarantees.
If you’re facing default or are concerned about missing payments, it’s imperative to act quickly. Our merchant cash advance attorneys are experienced with MCA debt settlement and can negotiate with your lender to restructure your payments or reduce the total amount owed.
Confessions of Judgement Agreements: How They Limit Your Options and What You Can Do
A Confession of Judgment (COJ) is a legal agreement many merchant cash advance lenders include in their contracts. When you sign a COJ, you essentially waive your right to defend yourself in court should the lender file a claim against you. This allows the lender to obtain a judgment without a trial if you default on the loan, bypassing the usual legal procedures. While this might expedite the process for the lender, it significantly limits your ability to contest the debt or negotiate terms.
Signing a COJ can have severe consequences for your business. Once the judgment is obtained, the lender can immediately move to seize your assets, garnish wages, or take other aggressive collection actions. This obviously impacts your current cash flow, jeopardizing your business’s very existence. Many business owners sign these agreements without fully grasping the extent of their implications, leaving themselves vulnerable to swift and often devastating recovery actions.
If you have signed a COJ or are being pressured into one, our MCA debt relief lawyers can provide crucial assistance. We can explore options to challenge the validity of the confession, negotiate with the lender, or work to mitigate its impact. If you haven’t signed a COJ yet, we can advise you on alternative financing options that better protect your rights and interests. Speak with us today to better manage your merchant cash advance debt.
McCarthy Law Will Defend Your Business
As business debt lawyers, McCarthy Law attorneys will work with you personally to learn more about you, your debt, and your challenges and devise an all-inclusive plan. We have helped many like you find their way out of these challenging situations.
Merchant service account collection can be very aggressive. We negotiate with your creditor for large reductions in these debts. Let’s talk today at no charge.
You can also learn more about second mortgage debt, commercial debt collection, and more.