Merchant Cash Advance UCC Liens: The Ugly Truth About Defaulting
You Took a Cash Advance, Now What?
So, you took out a merchant cash advance to get some extra capital for your business. Maybe sales were down, or you needed to make renovations, hire more staff – whatever the reason, that cash was a lifeline.But now, you’re struggling to make those daily payments back to the company. Those annoying calls from the MCA company keep coming in, and they’re getting pretty aggressive about it.You’re starting to wonder…what if I just stop paying altogether? What’s the worst that could happen?Well friend, I’m here to tell you – defaulting on that merchant cash advance is a really, really bad idea. Like, think twice (or three times) before you go that route.Why? Because these companies can put terrifying liens on your business that make it nearly impossible to move money, take out other loans/lines of credit, or even sell your business down the road.
What Exactly is a UCC Lien?
A UCC lien (that stands for Uniform Commercial Code) is a legal claim the merchant cash advance company can place on your business assets if you default.
“It’s like they get to plant a big ole’ flag in your business and say ‘This is ours now until you pay up!'”
When they file that UCC lien, it goes into a public database. So any other lenders, investors, or potential buyers of your biz can see that outstanding debt plain as day.And guess what? Pretty much no one wants to touch a business with open liens against it. It’s a huge red flag that makes it extremely difficult to:
- Get approved for loans or lines of credit
- Attract investors
- Sell your business for a decent value
Basically, that lien can completely handcuff your ability to move your business forward or make any big financial moves. It puts you in a very tough spot.
The Consequences of Defaulting Are No Joke
I’m not going to sugarcoat this – the consequences of defaulting on a merchant cash advance and having a UCC lien put on your business are pretty darn severe.We’re talking:
- Potential seizure of assets like equipment, inventory, cash accounts, and more
- Inability to take out other loans or lines of credit
- Difficulty selling or transferring ownership of your business
- Damaged credit that makes it hard to finance anything in the future
- Possible lawsuits and court judgments against you
Basically, it’s a total nightmare scenario that you really want to avoid at all costs. These merchant cash advance companies don’t mess around when it comes to collecting what they’re owed.
“But I Can’t Afford the Payments Anymore!”
Look, I get it – sometimes cash flow gets tight and making those daily or weekly payments feels impossible. Believe me, I’ve been there.Maybe your sales took a nosedive unexpectedly. Or you had to repair some expensive equipment. Whatever the reason, you’re struggling to make those remittances to the MCA company.But before you throw in the towel and default, there are some things you need to try first:
- Renegotiate Your Deal – Believe it or not, some merchant cash advance providers are willing to renegotiate the terms if you’re in a tough spot. It’s worth a call to explain your situation and see if they’ll temporarily reduce payments or restructure the deal.
- Seek Alternative Financing – If you can qualify, taking out another loan or line of credit to pay off that merchant cash advance may be an option. Just be careful about racking up too much debt.
- Increase Sales & Cash Flow – I know, easier said than done. But look for ways to boost sales, cut expenses, collect payments faster, etc. Any improvement in cash flow will help cover those payments.
- Sell Off Assets – As a last resort, you may need to sell off equipment, inventory, vehicles or other assets to free up cash to pay down or pay off that merchant cash advance.
The key is being proactive and exploring every other avenue before resorting to just stopping payments. That UCC lien is an absolute killer that you have to avoid.
Getting Out From Under a UCC Lien
Okay, let’s say you’ve already defaulted and the MCA company has filed a UCC lien against your business. Is there any way to get out from under that thing?The short answer is: yes, but it’s not easy. Here are a few potential options:
- Pay It Off – Obviously, the cleanest way to get rid of a UCC lien is to simply pay off the remaining balance owed to the MCA company. If you can somehow come up with the funds, this will allow them to terminate the lien.
- Negotiate a Settlement – You may be able to negotiate a settlement where you pay a lump sum that’s less than the full balance. In exchange, the MCA company agrees to terminate the lien. It’s not a guarantee, but could be an option if you can free up some cash.
- Dispute and Fight It – If you have a legal basis to dispute the legitimacy of the lien or the debt itself, you can try fighting it in court. This is extremely difficult and expensive, but may be worth exploring with a qualified attorney.
- File Bankruptcy – As a last resort, filing bankruptcy may allow you to discharge the debt and have the lien removed. However, this is an extreme option with severe negative consequences that should only be considered after exhausting all other possibilities.
The bottom line is that once that UCC lien is filed by the merchant cash advance company, it becomes extremely difficult to remove. Your best bet is to be proactive and avoid defaulting in the first place by renegotiating, seeking alternative financing, or improving cash flow.
Merchant Cash Advance Horror Stories
I’ll leave you with a few real-life horror stories of business owners who defaulted on merchant cash advances and had to deal with the fallout of UCC liens:
“I had to turn down a $1 million investment because of the lien. The investor’s attorney said it was too much of a risk to get involved with my company until it was cleared up. A year later, I’m still trying to pay it off.”– Sarah, Clothing Boutique Owner“
The MCA company seized my entire inventory after I defaulted. They came in with U-Haul trucks and cleared out my whole warehouse. I had to start completely over from scratch.”– Mike, E-Commerce Business Owner
“I’ve had three UCC liens filed against me over the years from different MCA companies. Because of that, I can’t get approved for any kind of loan for my business – not even a credit card. It’s really crippled my ability to grow.”– Carlos, Restaurant Owner
The moral of the story? Don’t underestimate how devastating defaulting on a merchant cash advance can be. Get ahead of it, explore all options, and avoid that UCC lien at all costs. Your business’s future may depend on it.