Looking for business debt relief services? Visit Delancey Street.
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Merchant Cash Advance Business Debt Relief
Merchant cash advances (MCAs) can provide quick access to capital for small businesses, but they also come with high costs and risks. If your business has struggled to repay an MCA, you may be facing aggressive collection tactics or threats of legal action. However, there are options to resolve MCA debt and achieve relief.
How Merchant Cash Advances Work
A merchant cash advance provides a business with a lump sum of capital in exchange for a percentage of future credit card sales. It is not technically a loan, so MCA companies can bypass small business lending regulations and charge higher fees.Here’s a quick rundown of how merchant cash advances work:
- You receive an upfront sum of cash, usually between $5,000 – $500,000
- The MCA company takes a fixed percentage of your daily credit card sales – typically 8-20%
- You make payments until you pay back the advance plus fees, which often equates to an APR between 60-400%
This structure allows fast funding but can become problematic if sales drop. You still owe fixed daily payments regardless of actual sales volume. Delinquency triggers aggressive collections aimed at seizing business assets and bank accounts.
Common Causes of MCA Debt Problems
There are a few common reasons why businesses struggle to repay merchant cash advances:
- Lower than expected sales – If sales drop, fixed daily payments become harder to cover. Seasonal business cycles or economic downturns often catch businesses off guard.
- Predatory lending practices – Some MCA companies do not adequately assess repayment ability. They lend too much relative to sales volumes.
- Repeat borrowing – Struggling businesses sometimes take out additional advances to repay existing ones, compounding overall debt.
- High fees and rates – Interest rates between 60-400% mean that even a small advance can result in unmanageable repayment amounts.
These factors can quickly spiral a business into defaulting on an MCA. Once in collections, owners may face lawsuits, bank levies, or harassment from collectors – causing even more financial harm.
Finding MCA Debt Relief
If your business is facing MCA debt troubles, know there are options and resources to achieve relief:
- Debt negotiation – MCA companies may agree to settle for less than the full balance if you negotiate a lump sum payment. This requires having available capital to make the offer.
- Payment plans – Some providers may agree to restructure the original agreement, spreading out payments over a longer period. This reduces risk of default.
- Debt consolidation – Combining MCA debts into a single loan allows you to pay down balances at less punitive interest rates. Banks typically require strong credit scores to qualify.
- Legal defenses – In some cases, predatory lending tactics may provide defenses against collection lawsuits. An attorney can review the original agreement for violations.
- Bankruptcy – Filing for Chapter 7 or Chapter 11 bankruptcy stops collections and provides an opportunity to reorganize or discharge qualifying business debt.
The path forward depends on your specific situation, debts owed, and access to capital. Speaking with a business debt relief professional is highly recommended to understand all options.
The Merchant Cash Advance Debt Relief Process
If you decide to seek professional assistance with your MCA debt, here is an overview of what you can expect:1. Initial Consultation
- In-depth review of your MCA agreements and business finances
- Specific advice tailored to your situation with estimated settlement amounts
- Explanation of all debt relief options available
2. Document Preparation
- Obtain verification of balances owed to MCA companies
- Gather bank statements, tax returns, profit/loss statements
- Complete client checklist of information needed to begin process
3. Negotiations & Settlement
- Debt relief company contacts MCA providers to negotiate reduced payoff amount
- If accepted, you sign agreement and provide settlement payment
- Company handles all communications until debt marked “paid as agreed”
4. Bankruptcy Filing (If Necessary)
- If settlement attempts fail, filing Chapter 7 or Chapter 11 may be best option
- Stops collections and brings debts under court protection
- Business keeps operating and works with trustee on repayment plan
5. Ongoing Support
- Assistance closing old business accounts/opening new ones
- Advice on rebuilding business credit score over time
- Guidance on accounting practices to avoid future debt issues
Having an experienced professional represent your business is key to successfully resolving MCA debts. They handle sensitive negotiations and complex legal processes – allowing you to focus on operating your business.
Key Takeaways on Merchant Cash Advance Relief
- Do Not Ignore Debts – Seeking help quickly gives more options before legal action.
- Compare Multiple Relief Options – Different solutions fit different situations and access to capital.
- Beware Debt Relief Scams – Only work with reputable companies with proven success records.
- Get Everything in Writing – Review all agreements thoroughly and keep documentation throughout the process.
- Focus on Future Sustainability – Develop practices to control costs and prevent another debt crisis down the road.
With the right business debt relief assistance, it is possible to break free from the endless cycle of merchant cash advance payments. Consult an expert to discuss the pros/cons and costs of each option – tailored specifically to your situation. There are paths forward to resolve MCA debts and empower your business.
Frequently Asked Questions
Can my business assets be seized because of an MCA?
- Yes, if a company sues your business and wins a court judgment, they can pursue asset seizure or bank levies to satisfy debts owed. Timely debt relief helps avoid this.
What is the difference between an MCA and a business loan?
- Loans have fixed repayment periods/interest rates. MCA’s repay from a percentage of sales over open-ended agreements with no limits on total fees charged.
Can I negotiate an MCA settlement myself without professional help?
- While possible, having expert assistance greatly improves the odds/amounts of settlements. They understand what offers providers may accept.
If I settle an MCA for less than I owe, will it impact my credit score?
- Yes, the provider will likely report settled debts to the business credit bureaus. This damages scores, but less than defaults/bankruptcies.
Are MCA companies allowed to contact my customers about debts owed?
- No, this violates federal law under the Fair Debt Collection Practices Act. Any such threats should be reported immediately.
About Delancey Street
Delancey Street has provided small business debt relief assistance since 2005. We have extensive experience negotiating settlements with over 50+ merchant cash advance companies. Our dedicated advisors understand this complex process and the aggressive tactics often used against business owners. We are proud to have one of the highest MCA settlement success rates in the industry.
Our Mission
We aim to represent the interests of small business owners against unethical, predatory lending practices. Our goal is to achieve maximum debt relief on your terms, prevent asset seizure, and assist you in rebuilding your company’s financial health. We offer complete transparency regarding expected settlement amounts, fees, and the options best suited to your unique situation.
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