Merchant Cash Advance Debt Relief:How to Save Your Business
Merchant Cash Debt Relief is the process by which your outstanding or existing merchant cash advances are modified into payments that allow your business to survive. Frequently a business will have more than one merchant cash advance.
It will be the duty of your debt relief lawyer to negotiate with your lenders to provide you the relief you need in order that you can resume making payments.
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How mca debt relief works
Your debt settlement attorney will gather the necessary information in order to apply for a hardship application based on your revenues.
A competent debt settlement lawyer will know exactly how to describe your predicament in order for you to receive a debt settlement.
During this process, your close cooperation with your attorney is essential in order to make the strongest case of hardship.
The mca debt relief process
The MCA Debt Relief Process consists of:
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Aggregating information
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Making the presentation
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Successful negotiation with your Merchant Cash Lender.
Each of these 3 stages is critical in securing a successful debt settlement. Of course, the Merchant Cash Advance Companies are not compelled to enter into settlement agreements, however, they frequently realize that this is their best hope of recuperating their money.
What Are Your Options When Trying to Restructure Your Merchant Cash Advance?
When trying to restructure your Merchant Cash Advance, your debt settlement lawyer will try to assist you by:
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Extending the term of payments
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Having the fees waived
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Having the Cash Advance Company forgive a portion of the original loan
The Cash Advance Companies will initially reject these settlement overtures, but eventually they realize that it is in their best interest as well to make a settlement.
What should we do if we cannot pay back our Merchant Cash Advance without default?
If you know that you will be entering into default, there are several critical moves that you must do in order to preserve your revenues so that your business can continue to operate during the debt settlement process.
Businesses that fail to prepare for the consequences of default, frequently find themselves with bank account levies, garnishments, and restraining orders. For this reason, it is critical that you contact an experienced debt settlement lawyer before entering into default.
What Happens When You Default on a Merchant Cash Advance?
Since lawyers for the Merchant Cash Advance Companies draft the agreement which you will sign, they ensure that the agreement is one-sided in favor of the Lenders. The main way in which they do this is by making the “Default Provisions” very strict.
Usually, these agreements will state that the merchant will be in default for failure to make even one payment. Considering that these agreements usually require a daily payment with an ACH withdrawal, there is a high probability that the Merchant will not have sufficient funds every single day to honor the ACH.
Businesses are constantly juggling cash flow against expenses and debt service. Therefore, it is foreseeable that there will be days when the merchant simply cannot pay his daily payment to the Cash Advance Company.
Missing this one payment, however, will be considered a “default” under the agreement, and all the strict provisions regarding default in the agreement will be applied. This includes an immediate “default penalty”.
The amount of this penalty depends on what was listed in the original agreement. In addition, there will be other penalties assessed such as an “insufficient funds” fee and “collection fee”. Since these fees were all listed in the original agreement signed by the merchant, it will be difficult to negate them.
The next step in dealing with a default, which is available to the Merchant Cash Advance Company, is to send the file to “Collection”.
The Merchant will now become inundated with calls, texts, and emails from the Collection Department of the Lender.
If the Merchant Cash Advance Company feels that these efforts will not prove successful, then they will send the file to outside counsel who will begin a suit on the default. This will cause an additional set of fees to attach to the debt of the Merchant, since the agreement stated that the Merchant would pay all attorney fees and costs associated with collection of a loan in default.
For these reasons, it is imperative that the Merchant secures a competent business debt relief attorney to assist him in every step of this process.
The MCA Settlement Process
There is no specific way to settle your Merchant Cash Advance Debt. In most cases, the Merchant Cash Advance Companies are willing to attempt to settle your Merchant Cash Advance that has gone into default.
The simple reason for this is that the Companies know that once a merchant is in default, their best chance of recovering any money on this advance is through the debt settlement process. During this process, an experienced debt settlement attorney will first attempt to file a “hardship application” showing the Merchant Cash Advance Company that the merchant can no longer make the daily or weekly payments stipulated in his agreement.
If the particular advance was based on the “purchase of future receivables”, then there will be a clause in the agreement by which the merchant can request that the Company recalculate the payments based on the decrease in revenue.
These procedures are complicated and should always be performed by an experienced debt settlement attorney.
Merchant Cash Advance Settlement
Once your attorney is able to reach a “settlement” with your Merchant Cash Advance Company, you will be required to enter into a Settlement Agreement. This agreement will detail the specific agreement which your attorney negotiated on your behalf.
Of course, the most important aspect of this agreement, is that you will be able to meet the agreed upon terms. Meaning, if the settlement agreement puts in a situation by which you will not be able to meet the daily or weekly payments, then you have not been benefited from the Settlement Agreement, and it will be only a matter of time before you once again are in default.
That is why it is critical that your debt settlement attorney structures the Settlement Agreement in a manner by which the merchant can make the new payments.
Understanding MCA Debt Restructuring:
What It Means for Small Business Owners
The terms of your new Settlement Agreement will be the result of your attorney’s successful negotiation with your Merchant Cash Advance Company.
This negotiation will possibly include: waiving of default fees and expenses, extending the term of the original advance, reduction of interest rate, and sometimes, even a reduction of the principal.
Why would a Merchant Cash Advance Company be willing to engage in all these settlement practices when initially, they were not flexible? The answer is that the Companies realize that only through debt settlement and compromise will they be able to get future payments from the merchant. Again, the overall goal of the Merchant Cash Advance debt settlement process is that the merchant will be in a position to afford future payments.
This requires establishing a recurring payment which the merchant can afford, and in no event, to secure an additional merchant cash advance to pay for the settlement of the first advance. This is commonly done, and is suicide for the business of the merchant.
We Can Assist You
If the entire Debt Settlement process seems overly daunting for you, don’t worry. We are here to provide you with competent counsel with experience in all aspects of business debt settlement.
How Merchant Cash Advance Relief Works
Step 1
Initial Consultation and Document Collection:
Once you've hired our law firm, our team of lawyers will collect all necessary information from you. This includes gathering copies of all documents you signed with the Merchant Cash Advance Company. We'll carefully review these documents to identify any mistakes made by the company that could potentially lead to the nullification of your contract.
Step 2
Preparation and Submission of Hardship Application:
After reviewing your documents, we'll prepare and submit a "hardship application" to your lender. This application will detail the reasons why you're seeking relief and why settling your debt is necessary. This step is crucial as successful debt settlement can prevent future litigation and may even help restore your business to profitability.
Step 3
Legal Defense and Negotiation:
Once the hardship application is submitted, our legal team will work diligently to negotiate with your lender on your behalf. We'll leverage our expertise and legal strategies to advocate for the best possible outcome for you, whether it's debt reduction, restructuring, or another form of relief. Throughout this process, we'll keep you informed and involved every step of the way.
FAQ
How do I settle my MCA debt?
Contact an experienced debt settlement attorney who will guide you in the preparation of a “hardship application”. This basically explains to the Merchant Cash Advance Company that you can no longer make your daily/weekly payments.
What is MCA debt?
MCA debt is debt incurred by a business through securing capital with Merchant Cash Advances. These advances take 2 possible forms: loans or “sale of future receivables”. Regardless of the form, the essence of these deals is basically the same; to lend money to a merchant at an interest rate approaching 50% over several months. These advances, if extended throughout the year, would yield an APR of more than 100%.
Should You Enter into an MCA Consolidation Loan?
The answer to this is usually NO. Once the merchant realizes the extremely high interest rate he is paying, along with the fees and strict default clauses, he will see that this was not a solution, but rather a worsening of his problem. There are merchants that believe that since they can not secure funding from any other source, that the merchant cash advance is their best option. Even in these cases, however, the merchant's situation will become exacerbated by the advance, not improved.
How do you restructure an MCA?
Your experienced MCA debt settlement attorney will restructure your MCA Advance by requesting that fees are waived, extending your term, reducing your interest rate, forgiving a portion of the principal.
How does Merchant Cash Advance Negotiation Work?
Merchant Cash Advance Negotiation begins with a thorough analysis of what the merchant is capable of paying. Once this is determined, then it is the role of the debt settlement lawyer to make sure that the final settlement will be within this range. It would be senseless to make a merchant cash advance settlement where the merchant would still be unable to make the agreed payments.
What are Alternative Financing Options to get out of an MCA?
An MCA can consist of a loan or "purchase of future receivables". The only real difference between the 2 forms of MCA is that when it is a "purchase of future receivables", the merchant has the right to request a "reconciliation" based on his decreased revenues. In this event, the daily or weekly payments will be reduced if the merchant can show that there has been a decrease of monthly revenues.