El Paso Merchant Cash Advance Legal Help – Finding the Right Attorney
Running a small business can be tough, especially when cash flow gets tight. That‘s why many business owners in El Paso turn to merchant cash advances to get quick access to working capital. But these financing products also come with risks – if you can‘t pay back the advance as agreed, you could end up in legal hot water.If you‘re an El Paso business owner struggling with merchant cash advance debt, don’t panic – help is available. In this article, we’ll walk through your legal options, including working with an attorney to negotiate a settlement or file bankruptcy if needed. We‘ll also share tips on finding the right legal help for your unique situation.
Understanding Merchant Cash Advances
Before we dive into the legal issues, let’s quickly review what a merchant cash advance (MCA) is.MCAs provide business owners with a lump sum of cash in exchange for a percentage of future credit card sales. The MCA company essentially “buys” the right to collect daily payments from a business until the full amount is repaid (plus fees and interest).Unlike a loan, MCAs don’t feature set repayment periods or fixed interest rates. Instead, the cost of financing comes from the percentage claimed from daily credit card receipts.This flexibility helps businesses access funds they couldn’t otherwise, but it can also create issues:
-- High costs – MCAs often feature equivalent annual interest rates over 50%, sometimes up to 200%.
- Fluctuating payments – If sales drop, repayment amounts may not cover fees and interest, meaning balances grow.
- Aggressive collections – Some MCA providers use legally aggressive tactics to collect payments.
While MCAs serve a purpose, they come with financial risks that sometimes necessitate legal assistance down the road.
Common Legal Issues with Merchant Cash Advances
Most MCA legal disputes center on unaffordable payments or overly aggressive collections tactics, including:
Unaffordable Payments
Since MCA payments fluctuate alongside credit card sales, some business owners end up facing payments they simply can‘t afford.Many providers use confessions of judgement that allow them to seize assets or freeze bank accounts if payments fall behind. Trying to modify unaffordable repayment terms often means facing threats or lawsuits.This situation almost always requires legal help negotiating new terms or filing bankruptcy if needed.
Aggressive Collections & Harassment
While some MCA providers work reasonably with struggling business owners, many resort to aggressive – sometimes illegal – collection tactics, like:
-- Harassing the business owner by phone/email
- Contacting employees, vendors, or customers about the debt
- Freezing bank accounts or seizing assets without notice
- Refusing to provide detailed accountings when requested
- Charging unlawful fees not agreed upon in the MCA contract
Dealing with debt harassment or unfair fee structures often requires legal counsel to stop unlawful behavior.
Violations of State Credit Laws
Merchant cash advances occupy a gray area in lending laws – while treated as purchases, they essentially operate as loans. Many providers exploit this gray area and break state laws governing lending practices.In Texas, for example, MCA providers must register as Credit Access Businesses (CABs) but often don’t. Unregistered CAB activity violates Texas credit laws and creates grounds for legal action.No matter what state you operate in, an attorney can review your MCA contract to spot violations of credit or lending statutes. State laws vary widely but may provide leverage to invalidate illegal contracts.
The bottom line – merchant cash advances present several scenarios where legal assistance makes sense. Understanding the specifics of your situation empowers you to make informed decisions.
First Steps – Prioritizing Cash Flow
Dealing with MCA debt takes time and money – two resources already in short supply for struggling businesses.Before rushing to an attorney, focus first on stabilizing cash flow day-to-day. This critical step gives you breathing room to assess options with counsel.
Open Communication
Start by contacting your MCA provider directly to discuss hardships keeping up with payments.Be honest about the challenges you face and come prepared with financial records. Reasonable providers may agree to modified terms, lower payments for a period, or other compromises.Document all communication and get any temporary agreements in writing. Harassment often starts after initial cooperation breaks down.
-Buy Time
If providers won’t negotiate, focus on buying time and limiting withdrawals. Consider steps like:
- Rerouting credit card processing – Temporarily process sales outside existing systems to limit access to funds.
- Freezing bank accounts – Speak to your bank about account holds to restrict withdrawals.
- Seeking investor funding – Discuss cash infusions with investors/partners to offset payment deficits.
- Tapping credit lines – Access existing credit to stabilize operations while assessing options.
These tactics aim to halt immediate cash bleeds as you determine next steps.
Don’t Ignore Threats
When facing lawsuits or asset seizures, seeking qualified legal counsel right away becomes essential. In many cases, aggressive legal action signifies an unwillingness to negotiate reasonably. Buy time wherever possible, but understand when to stop delaying and start acting.
-Finding the Right Legal Help in El Paso
Once ready to explore formal legal options, conducting some upfront research helps ensure you work with qualified counsel attuned to the nuances of your situation.
Look for Experience with Business Debt & Bankruptcy
Few attorneys focus exclusively on merchant cash advances, although some possess deep experience dealing with business financing disputes and debt settlement negotiations.Ideally, you want someone well-versed across business debt issues, including commercial lending, MCAs, collections violations, and bankruptcy law.Searching Avvo for business attorneys in El Paso provides a starting point for finding candidates. Schedule initial consultations and ask specifically about their MCA and business debt experience.
Understand Bankruptcy Options
For severely distressed businesses, negotiating debt settlements may prove impossible. In these cases, bankruptcy protection provides the only path forward.Chapter 7 and Chapter 11 bankruptcies help discharge unpayable debts while allowing businesses to restructure and continue operating. The right bankruptcy attorney navigates the complex filing process while positioning your business for financial viability post-bankruptcy.During initial consultations, gauge prospective counsel‘s grasp of using bankruptcies to discharge MCA debt and reset business finances.
Clarify Fees & Representation Scope
Attorneys bill for services in different ways:
- Flat/fixed fees – Set charges for defined scopes of work.
- Hourly billing – Fees accrue by time spent on your case.
- Contingency fees – Counsel receives an agreed percentage of any settlement/judgement.
Understand precisely how prospective lawyers charge for services before engaging them. Get fee estimates in writing and clarify what services get covered.Also discuss the defined scope of representation. Debt settlement and contract disputes generally feature well-defined legal scopes. Agree to reasonable boundaries so expectations stay aligned.
Find the Right Fit
Beyond credentials and costs, you want an attorney you trust personally – someone who earns your confidence and provides sound counsel tailored to your situation.During consultations, gauge responsiveness to your concerns and how well advice aligns with your business goals. The right lawyer-client fit speeds resolving issues smoothly and cost effectively.Tip: Check online reviews for client feedback about attorneys before engaging them. Sites like Avvo and Lawyers.com feature detailed reviews of most practicing lawyers.
Alternatives to Legal Action
While legal counsel empowers you to act against unscrupulous merchant cash advance companies, court battles prove time-consuming and expensive.For less distressed business owners, alternative approaches may resolve issues faster and more affordably.
Debt Refinancing
If cash flow allows, replacing MCA balances with lower-cost financing lets you regain control of payments. Options like business credit cards, SBA loans, or alternative lending can save significantly on interest while consolidating debts.Lenders like Nav specialize in refinancing MCA balances at lower costs over longer terms. While qualifications apply, it’s worth exploring for established businesses with dependable revenue.
Debt Relief Services
Professional debt relief services negotiate, settle, and restructure business debts, including merchant cash advances. Fees vary but generally cost less than attorneys while providing experienced guidance throughout settlements.The National Association of Debt Relief Providers offers a directory of certified providers throughout Texas capable of advising on MCA debt relief options.
Debt Consolidation
Debt consolidation combines multiple debts into a single payment plan generally stretched over longer terms. This helps cash-strapped business owners struggling with variable MCA payments.Consolidation works best for relatively stable businesses facing short-term setbacks. As cash flow improves, lower consolidated payments become affordable over time while avoiding aggressive collections.Non-profit credit counseling services like Money Management International offer free consultations to review debt consolidation options. They help organize payments and often negotiate waivers of fees or interest charges.For struggling El Paso business owners, plenty of options exist for dealing with legal issues stemming from merchant cash advance agreements gone awry. While daunting, acting decisively with qualified legal counsel or alternatives like debt relief services can stop harassment and restructure unaffordable repayment terms before problems spiral out of control.There’s no need to navigate MCA debt issues alone – help exists to guide you toward the resolution approach that best meets the needs of you and your business.