Steven Raiser is Chief Legal Officer, and Legal-Counsel at Delancey Street. Steven is a native of Long Island and has also resided in Manhattan and the Bronx.
Since being admitted to the New York Bar, Steven has represented the city of New York, serving as a Special Assistant Corporation Counsel. He handled all aspects of litigation in child neglect cases there, representing the interests of the children and the city. He then served as an Assistant District Attorney, where he successfully prosecuted hundreds of criminal cases, from violations of the Vehicle and Traffic Law to homicides. During his time as a prosecutor, Steven was involved in high-profile cases such as those involving Rapper DMX and NY Rangers’ Defenseman Sandis Ozolinsh.
-While serving as a prosecutor, he joined the U.S. Army. As a commissioned officer in the Army National Guard Judge Advocate General’s Corps, Steven volunteered for active duty in Iraq. There he served in the office of the Staff Judge Advocate, defending soldiers from actions instituted by the federal government, making probable cause determinations for the command, and assisting in the training of Iraqi soldiers in legal proceedings. In recognition of his service in Iraq, he earned the Global War on Terrorism Expeditionary Medal for meritorious service in support of Operation Iraqi Freedom and the Army Commendation Medal for exceptional meritorious service during combat operations. He, along with his unit, received the New York State Bar Association’s Award for Excellence in Public Service and was presented with our state flag by Senate Majority Leader Joseph Bruno.
Steven M. Raiser is admitted to practice law in the state courts and federal court in the Eastern District. On November 14, 2010, he was sworn in to the United States Supreme Court by Chief Justice John Roberts in Washington, D.C. Steven has appeared as a legal analyst for FOX, CNN, and Court TV (TRU TV). His interviews on CNN and FOX have been posted to their websites and have been showcased under “must see videos.”
-Dealing with merchant cash advance (MCA) debt can be overwhelming. MCAs, also known as business cash advances, are a form of financing where a company receives an upfront lump sum of cash in exchange for a percentage of future credit card and debit card sales. While MCAs can provide quick access to capital, the high fees and daily repayments can quickly become unmanageable. If you’re struggling with MCA debt, there are steps you can take to reduce and potentially eliminate what you owe.
Understand Your Agreement The first step is to thoroughly review your MCA agreement and understand the terms. What is the amount you received upfront? What is the holdback percentage deducted from your daily credit card sales? Is there a specified payback amount or term? Understanding the specifics will allow you to calculate what you currently owe and determine the best path forward. Consulting a business lawyer can help explain any confusing or ambiguous clauses.
Ask Your MCA Company for Better Terms Once you understand your agreement, contact your MCA provider directly and explain that the current repayment schedule is unsustainable for your business. While MCA companies are often unwilling to negotiate, it doesn’t hurt to ask. Be prepared to share financial statements that demonstrate the cash flow issues. Ideally, you can negotiate a lower holdback percentage, extended term length, or partial settlement. Here are some tips for negotiating effectively:
- Remain professional and focus on finding a mutually beneficial solution, not blaming or threatening legal action.
- Have specific requests in mind, like reducing the holdback to 10% or extending the term by 6 months.
- Offer increased operating transparency, like providing more frequent sales reports.
- Suggest altering the repayment structure, like switching to fixed daily payments instead of a percentage of sales.
- If the lender won’t negotiate, calmly request alternatives like signing up for auto-debit payments to show good faith.
Explore Debt Consolidation If the MCA company won’t negotiate terms, debt consolidation may be an option. This involves combining multiple debts into one new loan with lower interest rates. While traditional banks don’t offer many consolidation options for MCA debt, there are specialty lenders like Fox Capital and Forward Financing that understand MCA agreements. They can pay off the MCA balance in full and provide more affordable repayment terms. Be sure to compare interest rates and fees from multiple lenders before choosing this route.
Sell Unnecessary Assets Take an objective look at your business assets and equipment to identify anything non-essential that could be sold. This could include unused vehicles, office furnishings, or excess inventory. While selling assets can provide an immediate cash infusion to pay down MCA debt, be careful not to liquidate important items that would impair daily operations. Utilizing sites like Craigslist and eBay can help maximize resale value.
-Renegotiate Business Leases Another source of potential cash flow is renegotiating any leases for commercial real estate, equipment rentals, vehicles, etc. If your business has improved its financial position since originally signing the lease, you may be able to negotiate better terms, like lower monthly payments or an extended length. Be prepared to share updated financial statements. Even a modest $200 per month reduction on a 3-year office lease can free up $7,200 to pay down debt.
Request Lower Vendor Payment Terms Contact key vendors providing goods and services to your business and request extended payment terms. For example, instead of net-30 terms, ask if you can pay within 60 or 90 days. This preserves cash in the short term that can be put toward MCA payments. Offer to sign a payment plan agreement that demonstrates your commitment to pay the full amount owed. Be sure to only make this request with vendors you have a long-standing positive relationship with.
Increase Sales and Profits The most direct way to get out of MCA debt is to increase your business’ sales and profits. This provides more working capital to make daily payments while relying less on credit card receipts. Some strategies include:
-- Running promotions like discounts or rebates to attract new customers
- Calling former customers to generate repeat business
- Upselling current customers to increase average order value
- Streamlining operations to reduce costs and increase margins
- Exploring new revenue streams or target markets
- Investing in online marketing and SEO to drive website traffic
Even marginal gains make a difference when aggregated over time. The key is balancing short-term sales boosting tactics with long-term growth strategies.
Bring in Investors or Partners
For more significant cash needs, bringing in investors or business partners could make sense. You can sell equity in the business in exchange for a lump sum investment to pay off expensive MCA debt. The challenge is finding investors who believe in the long-term upside of your business and are willing to accept the risks. Having a strong business plan and financial model are key to attracting interest. Sites like AngelList and Fundable can help connect with potential investors.
File for Bankruptcy as a Last Resort If all other options have been exhausted and your MCA debts remain unmanageable, filing for business bankruptcy protection may be a last resort. This involves either liquidating company assets to pay creditors or restructuring debts under Chapter 11. Bankruptcy severely damages your business credit and should only be pursued when absolutely necessary. Be sure to consult with a qualified bankruptcy attorney beforehand to understand the full implications. The process provides relief from MCA payments but makes securing financing very difficult in the future.
Key Takeaways
- Carefully review your MCA agreement to calculate what you currently owe and identify any negotiable terms.
- Contact your MCA provider directly and professionally request reduced holdback percentages, extended repayment timelines, or partial settlements.
- Explore specialty lenders that offer MCA debt consolidation loans with more affordable rates and terms.
- Liquidate non-essential business assets to generate funds to pay down balances quicker.
- Renegotiate leases and request extended vendor payment terms to preserve short-term cash flow.
- Implement promotions and operational changes to sustainably increase sales and profits.
- Consider bringing on investors or business partners who can provide capital injections.
- Only file for bankruptcy protection as an absolute last resort due to the long-term consequences.
By understanding all of your options and taking a strategic approach, it is possible to reduce and resolve Merchant Cash Advance debt without severely impacting your business. The key is being proactive and exploring every available alternative. Don’t wait until missing payments or collections calls trigger even costlier fees and penalties. With persistence and creativity, you can develop an action plan to regain control of your finances.
Resources:
- A Guide to Merchant Cash Advance Debt Consolidation – Fundera guide with more details on MCA debt consolidation options.
- How to Get Out of a Merchant Cash Advance – Tips from Fit Small Business on escaping predatory MCA agreements.
- Merchant Cash Advance Horror Story – Cautionary reddit thread on the risks of MCA loans.
- When Merchant Cash Advances Go Wrong – Entrepreneur article profiling small business owners struggling with MCA debt.
- Merchant Cash Advance Nightmare – YouTube video explaining why MCA loans can be so problematic.
Dealing with high-interest MCA debt is stressful but recoverable with the right approach. The key is thoroughly understanding your agreement terms, negotiating with the provider, and implementing both short and long-term strategies to increase cash flow. While bankruptcy or defaulting should only be considered as an absolute last option, exploring consolidation loans and other alternatives can help ease the burden. Don’t wait to take action—every day that goes by allows expensive fees to accumulate. With dedication and creativity, it is possible to regain control of your finances and move your business forward.