If you own a business, you probably already know that maintaining sufficient cashflow is critical. However, with seasonal fluctuations, competition, and other variables outside of your control, trying to maintain financially stability while operating a small business can be challenging. Money is needed for inventory, raw materials, supplies, and human resources, so taking a business loan or a merchant cash advance can seem like an attractive option.
Most traditional business loans require a monthly payment that is commensurate to the principal amount borrowed, plus fees, and compounding interest. In contrast, a “Merchant Cash Advance” (MCA) will usually require daily payment at an amount determined by the contract. Under this arrangement, the business owner is given an advance of funds against their merchant credit card processing. In exchange, the merchant agrees to pay the advance along with a premium by authorizing the funding company to withdraw daily payments from their business bank account.
Where you may be accustomed to making a monthly payment on bank loans, Merchant Cash Advance funding usually requires a set amount of money paid each and every day. If your business is struggling to bring in an adequate amount of money, these daily payments could become nearly impossible to fulfill.
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Don’t allow a defaulted business debt become the death of your company! Speak to our merchant cash advance lawyers to learn your debt relief options. Here are a few things you should know about business funding; how to protect yourself, and what you should do if you feel like you need to default.
When reviewing lawsuits for Merchant Cash Advances, our attorneys notice that most of the contracts contain an acceleration clause as well as a personal guarantee. The acceleration clause will cause the full contractual balance to become due when certain triggers arise, such as when the borrower defaults on the daily payment schedule, or changing deposit accounts with the company’s merchant processor.
The cash advance is secured, or collateralized, against the businesses future credit card receivables, and with a UCC lien, can be collected through seizure of business assets. In the event of default, the funding company could pursue the assets of a personal guarantor individually by bringing a lawsuit.
Beware! Business Debt Tip #1 – Confession of Judgment: When a business owner is on the brink of default, the merchant advance funding company might offer to temporarily adjust the payment plan due to hardship, but they may request that the business owner sign a “Confession of Judgment” (COJ). This is a powerful document. If the business owner signs the Confession of Judgment, the funding company can seek entry of judgment against the borrower without necessarily having to prove the elements their underlying case. This can put the personal guarantor at even greater risk.
Beware! Business Debt Tip #2 – Forum Selection in New York: A large number of Merchant Cash Advance funding companies are based in New York City or Nassau County, NY. As a matter of their convenience, they often prefer litigating their cases in a court local to them. They can sometimes accomplish this by including in their merchant funding agreements a Forum Selection Clause where the parties agree that any litigation will be initiated in a specific forum. For example, Merchant Cash and Capital a/k/a BizFi commences their lawsuits for cash advance cases primarily in Nassau County Supreme Court. Since these companies provide funding across many states, the Forum Selection Clause may put a borrower at some disadvantage with respect to defending the claim. If seeking legal representation, the borrower would need to retain a lawyer licensed in New York. The borrower would likely benefit being represented by an attorney experienced with defending lawsuits in the specific New York court where the lawsuit was commenced.
Defaulted cash advances and loans can pile up quickly and can cause an insurmountable burden on the company’s finances. With high rates, even missing a few payments can cause business debts to spiral out of control. There are penalties, collection costs, miscellaneous fees and negative credit reporting that can cause a business owner to simply feel that they have no option other than filing for bankruptcy.
Even when defaulting is unavoidable and based on legitimate financial hardship, business lenders can hire debt collectors to call you at your home and business, write you letters, or even retain a collections attorney to bring a lawsuit. MCA funders and loan originators are in the business to make a profit, and their collectors will work, sometimes aggressively, to maximize their recoveries.
Our team of experienced lawyers has assisted with a wide variety of defaulted debts; from corporate credit cards and business loans to vendor debts and merchant cash advances. In addition to defending businesses and individuals from debt collection lawsuits, we also assist in reducing business debts through skillful settlement negotiations.
Some of the basic qualifications to retain our lawyers to reduce business debts is that the distressed company must be experiencing legitimate financial hardship that can be substantiated, and further, the business must have access to funds for repayment. In situations where a debt reduction is not successfully negotiated, the lender might still be willing to restructure the payments on the full balance so that it can be more affordably paid by the borrower.
Reduce Merchant Cash Advance & Business Loans
First, we will analyze your situation, including how many debts are owed, to whom, for how much, and whether they are current, in delinquency, or default. We will discuss with you the status of the business, whether it is still operating, and what assets exist. If you qualify for any of our services, such as merchant cash advance restructuring or business debt settlement, we will explain to you the advantages and disadvantages of your available options, so you can make a well informed decision.
On behalf of distressed businesses, our New York City attorneys work to restructure cash advances to obtain payment plans that can help keep your head above water. Even if you have more than one MCA cash advance or business loan, it still might be possible to get into a more affordable arrangement, and potentially avoid a lawsuit or filing for bankruptcy.
While getting funding from a Merchant Cash Advance may have helped you find the financial wherewithal to get you off your feet, it can also easily become the thing that stops your small business from reaching success. If you are struggling to make your daily payments or have been forced to take out loan after loan to make payments on the loans that came before them, don’t struggle on your own to find the relief that you need.
Instead, contact the legal team at the Law Office of Simon Goldenberg, PLLC to begin taking the necessary steps to take your financial freedom back. We know what it takes to protect you from aggressive business collections.