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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 protect your business.
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 state lending laws 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 high cost of capital makes MCAs risky for small businesses. If sales decline, you still owe daily payments based on the fixed percentage. Many companies quickly fall behind and end up owing double the amount they originally received.
The Risks of Merchant Cash Advances
While MCAs provide fast access to capital, they come with considerable risks:
- Extremely high APRs – MCA fees equate to APRs of 60-400%, much higher than business loans
- Daily payments – You owe payments every day regardless of actual sales
- Aggressive collections – MCA companies can debit business accounts without warning
- Personal liability – Owners often personally guarantee repayment
As a result of these risky terms, the MCA industry sees very high default rates of 30% or more. If your business has defaulted, you may already be facing collections pressure and threats of legal action.
Options for Resolving MCA Debt
If your business owes an unaffordable merchant cash advance, you have options to resolve the situation. However, you need to act quickly before the MCA company escalates collections or files a lawsuit. Potential options include:
Debt Settlement
With professional assistance, you may be able to negotiate a lump-sum settlement with your MCA company for less than the full balance owed. This can eliminate the debt, stop collections calls, and prevent potential lawsuits.
- Settling requires a lump-sum payment, often 20-50% of the full balance
- Success depends on the MCA company and your negotiating leverage
- Using a professional settlement firm increases success rates
Business Bankruptcy
Filing for Chapter 7 or Chapter 11 bankruptcy may allow you to discharge or restructure MCA debt. This legally halts collections and prevents lawsuits while resolving debts under court protection.
- Discharge MCA debt in Chapter 7 bankruptcy
- Restructure payments in Chapter 11 bankruptcy
- Stop collections calls and prevent lawsuits
- Work with attorney to navigate complex process
Business Debt Relief Programs
Specialized non-profit programs like the Small Business Relief Program help small businesses resolve unaffordable debts from MCAs and other alternative lenders. These programs provide education, coaching, and customized debt relief solutions.
- Get free education on debt relief options
- Receive customized advice from coaches
- Settle debts through pro bono legal help
- Discharge debt in some cases
Beware of MCA Debt Relief Scams
Unfortunately, many so-called MCA debt relief companies are actually scams that charge illegal upfront fees or fail to deliver promised results. You should avoid any company that:
- Charges any fees before settling debts
- Guarantees to erase your debt completely
- Pressures you to sign anything on the spot
- Makes verbal promises but no written contract
Legitimate debt relief should only charge fees after negotiating settlements and provide detailed consultations on all options. Get promises in writing before signing contracts or paying fees.
How We Can Help With MCA Debt Relief
Our financial consulting firm provides real debt relief solutions tailored to your small business situation. With over 10 years of experience assisting companies with MCA debt, we take an honest, ethical approach focused on finding the optimal solution.Here is what we offer:
- Free Consultation – We will conduct an in-depth review of your business finances to gain clarity on the full scope of debts owed. This allows us to provide specific advice tailored to your unique situation.
- Expert Guidance – Our financial professionals thoroughly explain all your options, including settlement, bankruptcy, and debt relief programs. We help you understand the pros, cons and costs to make an informed decision.
- Settlement Negotiations – If settlement is the best approach, we negotiate with your MCA provider to reduce the debt owed. We leverage our experience and proven tactics to secure maximum debt forgiveness.
- Non-Profit Program Assistance – We can refer you to reputable non-profit programs that provide small business debt relief services for free. These programs help discharge MCA debt in some situations.
- No Upfront Fees – Unlike scam debt relief companies, we do not charge any upfront fees. Our fees only come from a percentage of savings achieved through settlements.
If your small business is struggling with overwhelming MCA debt, contact us today to discuss your situation. Our dedicated financial experts will talk through all your options and provide tailored advice and solutions.
Frequently Asked Questions
Here are answers to some common questions we receive about merchant cash advance debt relief:
Can I negotiate with an MCA company directly?
You can try negotiating directly, but MCA companies rarely agree to settlements without leverage. They rely on aggressive tactics to collect debts in full. Using a professional with negotiating experience is best.
What happens if I just stop paying the MCA provider?
Defaulting will trigger aggressive collections and eventual lawsuits. The MCA company can obtain judgments to garnish business accounts or the owner’s personal wages and assets. It’s best to act preemptively through settlement or bankruptcy before defaulting.
How long does the debt relief process take?
If using settlements or debt relief programs, the process typically takes 2-6 months from start to finish. Bankruptcy cases require 3-6 months to complete the filing and discharge process. Acting quickly is key before the MCA company escalates collections activity.
Can debt settlement or bankruptcy hurt my personal credit?
Business bankruptcy filings can impact personal credit scores temporarily but won’t lead to personal bankruptcy. Debt settlements have no credit bureau reporting and thus don’t affect personal credit scores.
Are debt relief options free? What are the costs?
Non-profit small business debt relief programs offer services for free. For-profit providers like settlement companies charge contingency fees from a percentage of savings achieved. Bankruptcy legal fees vary by case complexity. All options have pros/cons and transparent costs.
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