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Merchant Cash Advance Debt Relief: The Ultimate Guide

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a type of financing where businesses get an upfront lump sum of cash; in exchange, they agree to pay back that amount — plus fees — from a percentage of their future credit card sales.It’s not a loan, technically speaking. With an MCA, you’re selling a portion of your future receivables at a discount.MCAs are marketed as an easy way for businesses to get capital quickly, without the hassle of lengthy applications or strict approval criteria like you’d find with a bank loan. But they come with some major downsides too.

The Dark Side of Merchant Cash Advances

While MCAs provide fast cash, the fees and effective APRs can be obscenely high — think triple digits in many cases. And the repayment setup, where lenders get a cut of all your credit card sales until the advance is paid back, can really hamstring your cash flow.There are also concerns about predatory lending practices in the merchant cash advance industry, like stacking multiple MCAs on the same business without disclosing the true costs.So while an MCA might seem like a lifeline when you‘re desperate for funding, it can easily turn into a debt trap that puts your business at risk.

Merchant Cash Advance Debt Relief Options

If you’ve taken out one or more merchant cash advances and are struggling with the payments, there are a few potential paths for debt relief:

Restructuring or Settlement

Working with a reputable debt relief firm, you may be able to renegotiate the terms of your MCA for lower payments, or settle the full amount for a discounted lump sum payment.This option preserves your credit and legal standing, but can still be costly depending on the settlement amount. It’s best explored before you’ve defaulted and the MCA company has pursued legal action.


For businesses buried under unsustainable MCA debt, bankruptcy may be the only viable option. An MCA is considered a loan product in bankruptcy court, so it can potentially be discharged.The downside is bankruptcy‘s severe negative impact on your credit and ability to get future financing. It‘s an option of last resort, but one that may allow your business to survive and rebuild.

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Legal Defenses

In some cases, the MCA company may have violated disclosure requirements, lending laws, or engaged in deceptive practices when extending the advance. An experienced attorney may be able to get the agreement voided or damages awarded.Legal action is expensive though, and the burden of proof is high. It’s only advisable if you have a very strong case and the resources to fight it out in court.No matter which path you pursue, the key is acting quickly before the debt snowballs out of control. The sooner you explore MCA debt relief, the more options you’ll have.

Signs You Need Merchant Cash Advance Help

Not sure if your MCA situation warrants debt relief? Here are some red flags:

  • You’re struggling to cover operating expenses after the daily/weekly MCA payments
  • Your effective APR is over 50% (often it’s much higher)
  • You have multiple stacked MCAs from different companies
  • You were misled about the terms or total payback amount
  • You’re considering a new MCA just to pay existing ones
  • You’re falling behind on payments and being threatened with legal action

If any of those apply, it’s likely time to get professional debt relief help before your business spirals into insolvency.

How to Avoid Merchant Cash Advance Debt Traps

The best way to deal with MCA debt is preventing it in the first place. Here are some tips:

  • Understand the true costs – Calculate the estimated payback amount and effective APR before signing anything. If it’s over 50%, run!
  • Avoid stacking – Taking multiple MCAs from different lenders is a recipe for disaster. The payments become unsustainable.
  • Read the fine print – Shady MCA providers often bury terms that allow them to increase payments, collect late fees, etc.
  • Have a plan to pay it off quickly – MCAs should be very short-term cash band-aids, not long-term financing solutions.
  • Explore other funding first – SBA loans, lines of credit, invoice financing, etc. are often much cheaper than MCAs.

The MCA industry is still largely unregulated. So as a business owner, you need to be extremely diligent about the terms and lender practices. Otherwise, it‘s easy to get trapped in cycles of debt.

The Merchant Cash Advance Debt Settlement Process

If you’ve already fallen into an MCA debt spiral and decide to pursue settlement, here’s a general overview of how it works:

  1. Find a reputable debt settlement firm – Do your research and read reviews. Avoid anyone asking for upfront fees.
  2. Debt analysis and underwriting – The firm will analyze your MCA agreements, business finances, assets, etc. to determine a reasonable settlement range.
  3. Negotiation and settlement – The debt firm negotiates with your MCA providers to accept a lump sum payment for a significant discount on amounts owed.
  4. Payment of settlement – You pay the agreed settlement amount, often using a portion of business revenues or assets. The MCA is then considered paid off.
  5. Establish new credit relationships – With the MCA debt behind you, you can start rebuilding business credit and exploring more sustainable financing options.
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The process can take several months from start to finish. And there’s no guarantee the MCA companies will accept a settlement deal. But it’s often the best path to financial recovery.

Merchant Cash Advance Debt Statistics

  • The merchant cash advance industry issued over $15 billion in funding to small businesses in 2017 alone (Source)
  • Average effective APRs on MCAs range from 70% to 350% (Source)
  • Over 70% of businesses that take an MCA end up taking a second one shortly after (Source)
  • Only around 40% of MCA borrowers fully understand the payback amount when they take the advance (Source)
  • The MCA industry is projected to grow to over $19 billion in funding issued by 2024 (Source)

As you can see, the combination of high rates, lack of underwriting standards, and limited borrower education creates a perfect storm for debt problems in the MCA industry.

Merchant Cash Advance Pros and Cons

Like any financing product, merchant cash advances have potential upsides and downsides for businesses:

Pros of MCAs:

  • Fast access to capital (approval in days)
  • No hard credit check or strict approval criteria
  • No set repayment schedule – pay as a % of sales
  • Funding can be renewed by taking new advances

Cons of MCAs:

  • Extremely high effective interest rates (70%+ APRs)
  • Repayment eats into cash flow from all sales
  • Stacking and renewals can lead to debt traps
  • Lack of regulation/compliance in the industry
  • Potential for deceptive lending practices

For businesses in a true short-term cash crunch, an MCA can provide a lifeline. But the risks of getting trapped in recurring, high-interest debt are very real.

MCA Debt Relief Alternatives

If your business is struggling with MCA debt, there are a few potential alternatives to explore before resorting to settlement or bankruptcy:

Debt Consolidation Loan

You may be able to pay off those high-interest MCAs by taking out a lower-interest debt consolidation loan or line of credit. This simplifies repayment and can reduce total costs.The catch? You’ll need good enough credit and cash flow to qualify for more affordable financing.

Debt Restructuring With Lenders

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It’s always worth reaching out to your MCA providers to request restructured payment plans, temporary forbearance, fee waivers, etc. Some may work with you to avoid default.But you‘ll need leverage, like the ability to negotiate a lump sum settlement. And lenders have little incentive to play ball if they can easily freeze your accounts.

Asset Sale or Investment

Selling off business assets, taking on an investment partner, or even a short-term side gig could provide the funds to pay off MCA balances quickly.Of course, this requires having valuable assets, finding willing investors, or generating significant extra income – all tough tasks for a struggling business.

Revenue-Based Financing

This newer form of funding is similar to an MCA, but with some key differences that can make it more sustainable, like capped payments and revenue sharing vs. fixed debt.The downside is approval can still be difficult, and effective costs may not be much better than an MCA.If none of those alternatives pan out, professional debt settlement or bankruptcy may be the only paths left to resolve your MCA debt situation.

How to Find a Reputable MCA Debt Settlement Company

If you decide to hire a debt settlement firm to renegotiate or settle your merchant cash advances, be very cautious. The debt relief industry has its fair share of scammers.Here are some tips for finding a trustworthy, ethical MCA debt settlement partner:

  • Check regulatory compliance – Only work with firms that are licensed to operate in your state and follow FTC debt relief rules.
  • Verify credentials and experience – Look for companies and negotiators that specialize in dealing with the MCA industry.
  • Get fee structure details upfront – Avoid any firms that charge non-refundable upfront fees before settling debts.
  • Read independent reviews – Check sites like the Better Business BureauReddit r/personalfinance, and Trustpilot for unbiased customer feedback.
  • Ensure transparency – The firm should explain their process, estimate potential savings, and be upfront about limitations.
  • Check settlement policies – What happens if they can’t settle all your debts? What’s their refund policy?

A bit of due diligence can save you from unscrupulous MCA debt relief scams and find a partner you can actually trust.

Delancey Street is here for you

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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