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Can an MCA Company Really Freeze Your Bank Account?

They call themselves “merchant cash advance” providers – but make no mistake, these aren’t your friendly neighborhood loan officers. MCA companies play by their own set of rules, with devastating consequences if you miss a payment.

So, what exactly gives them the power to freeze your entire bank account and cut off your business’s financial lifeline? The answer lies in those dense contracts full of fine print you likely skimmed or ignored when signing up.

The MCA “Loan” Trap

First, let’s dispel a common myth: MCAs are not actually loans. They are a purchase and sale of your future receivables at a significant discount.

By signing an MCA agreement, you’ve granted the company a perpetual lien on your incoming cash flow – whether from credit card sales, invoices, you name it. Miss too many “payments” of your sold receivables, and the full hammer comes down.

“But I always pay on time!” you protest. Sorry, but a financially rocky month or two is all it takes to trigger default clauses buried in those pages of legal jargon.

When the Debt Collectors Call…

Suddenly, you receive ominous calls demanding immediate full repayment – often over double what you originally borrowed. Before you can catch your breath, your accounts payable start bouncing like rubber checks.

Why? Because the MCA company has confiscated whatever funds remained in your business accounts, thanks to that convenient “account control agreement” you signed.

Hypothetical: Your Funds, Frozen

Visualize this scenario: You wake up, brew a coffee, and log into your online banking – only to find your balances at $0.00. Your jaw drops as you realize the MCA company has frozen all accessible funds as “collateral” for your remaining sold receivables.

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How long will this last? Indefinitely, until you buy back that lien on your cash flow by paying exorbitant settlement fees and interest charges. Meanwhile, good luck paying employees or vendors – your business is effectively crippled.

The “Confession of Judgment” Dagger

In many MCA contracts, you’ll also find terrifying “confession of judgment” clauses. By signing, you’ve pre-admitted guilt to any future alleged offenses.

So if you default, the MCA provider can instantly obtain a court judgment to garnish funds directly from your bank accounts and place liens on your assets – no trial, no defense heard.

“Wait, isn’t that unconstitutional?!” you might protest. Yet shockingly, these provisions continue being enforced by courts across several U.S. states.

Prevention and Protection

The harsh reality? MCA contracts are designed to jeopardize your cash flow the moment you can’t keep up with payments. Once you miss that window, it’s extremely difficult to regain control.

So before signing anything, have an experienced attorney review every clause and contingency plan. Discuss alternative funding options that don’t involve relinquishing ironclad rights to your income streams.

If you’ve already fallen into the MCA trap? Seek legal counsel immediately to defend your rights and mitigate potential damages – your bank accounts and assets could depend on it.

The Bottom Line

Merchant cash advance companies employ ruthless tactics to enforce their draconian contracts. Don’t let the friendly sales pitch fool you – when it comes to defaults, your funds are never truly safe.

Protect your business by arming yourself with knowledge and counsel before signing anything. Because when it comes to MCAs, prevention is vastly cheaper than any cure.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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$500,000 MCA Restructured Over 3 Years
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