How to Use Debt Consolidation to Address Merchant Cash Advance Default
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REGARDLESS of whether you’re facing a severe merchant cash advance (MCA) default, REGARDLESS of your stage in the repayment of the MCA, and REGARDLESS of the type of business debt you have, we can help you. Our team at Delancey Street is a top-tier business debt relief company, which focuses on helping entrepreneurs who’ve fallen behind on MCA obligations. We are able to help with ALL types of MCA debt, and we’re unafraid of doing what we have to do, in order to succeed.
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We take pride in providing the best solutions possible for businesses, which have high-cost merchant cash advances. MCAs sometimes come with daily withdrawals and predatory terms. Guess what? Debt consolidation could be your lifeline. Sometimes, the only way out of multiple MCA’s – is combining them into one big loan. For example, an SBA loan, or a private equity infusion. There can be a number of ways out of this predicament.
Delancey Street saves a business owner over $400,000
That’s a real headline – our proven track record in business debt settlement says it all. We can help you get out of business debt with a real game plan.
Understanding the Merchant Cash Advance Default Landscape
A merchant cash advance is an advance on your future receivables. Typically, the MCA provider collects a % of your credit card sales daily or weekly. If you miss payments, defaults on your MCA can trigger substantial fees, lawsuits, and even personal liability. Here’s the bottom line: you could face harsh consequences if you don’t address default quickly, which is why debt consolidation can be a strategic route.
Look, here are some potential penalties and legal implications when you default on an MCA:
- Acceleration Clauses: Many MCA agreements include clauses which allow the lender to demand the entire unpaid balance immediately if you default. This is not forgiving. You will immediately be responsible for paying it all.
- Confessions of Judgment (COJ): In some states, MCAs contain COJ clauses which let the lender get a judgment without typical due process. This can lead to sudden bank account freezes and asset seizures. See New York State Unified Court System for more details on COJ enforcement.
- Personal Guarantees: Often, the MCA will ask for personal guarantees, meaning your personal assets are on the line if your business fails to repay.
- Sky-High Default Fees: When you default on your merchant cash advance, the MCA provider can impose penalty fees on top of the factor rate, which can escalate your total debt.
- Potential Lawsuits: Lenders can sue you under breach of contract or enforce a COJ. Refer to the Federal Trade Commission (FTC) for resources on unfair lending practices.
Regardless of your default, we can help you.
How Debt Consolidation Assists with Merchant Cash Advance Default
Debt consolidation means taking out a new loan, or credit facility, to combine multiple debts – including MCAs – into one monthly payment. This debt consolidation loan used to combine multiple MCA’s can help by lowering your interest rate, reducing total payments, and simplifying how you manage your business debt. The resulting room can preserve cash flow and prevent the daily or weekly withdrawals which are strangling your operations.
- One, you secure a consolidation loan or line of credit
- Two, the consolidation lender pays off your existing MCA
- Three, you make a single payment to the consolidation lender under more favorable terms
For more details on consolidation lending guidelines, you might review the Small Business Administration (SBA) resources.
What You Should Know about Potential Laws and Penalties
Some states have laws that regulate merchant cash advances under consumer protection laws, which may or may not explicitly cover business loans. Moreover:
- Uniform Commercial Code (UCC): In many MCA contracts, the MCA provider may file a UCC-1 lien to secure your receivables as collateral. You can learn more at Cornell Law School’s Legal Information Institute.
- Bankruptcy Code Implications: If you consider bankruptcy, certain MCA defaults are subject to automatic stays under Title 11 of the U.S. Code.
Always remember: no lender wants you to file bankruptcy. They often prefer negotiating or restructuring the terms – which is precisely why debt consolidation could be a beneficial approach. They would rather get 90 cents on the dollar, rather than no money back. They know that bankruptcy is a blackhole.
Strategic Defense for MCA Defaults
We understand the fear of lawsuits, confessions of judgment, or personal liability. Our approach to dealing with business debt usually involves:
- Analyzing Your Agreements: We look at every clause, especially if you have a COJ or personal guarantee.
- Negotiating a Reduction or Extension: Sometimes we can negotiate lower factor rates, extended repayment terms, or total balance reductions.
- Consolidating Your Debts: We help you find the right consolidation loan product which can combine your multiple MCA’s quickly.
- Legal Protection: If a lender threatens immediate legal action, we utilize experienced attorneys to defend you.
- Communication is Key: Our team sets up lines of communication with lenders – they want to get paid, and we make sure they’re willing to negotiate.
DEDICATED to Protecting You
In certain scenarios, we start an aggressive legal defense which can dismantle the MCA claim if there’s evidence of unconscionable contract terms, hidden fees, or usurious rates (in states where relevant laws cap interest). We challenge provisions in the agreement, including:
- Unfair penalty clauses
- Excessive daily withdrawal schedules
- COJs which bypass standard court procedures
Imagine your MCA provider tries to enforce a COJ, claiming an large sum which could shutter your business. Step one? We analyze if the COJ was filed in a jurisdiction which even allows it. Next, we question the authenticity of the notarization, the timeline, the original agreement’s validity. If the provider can’t meet its burden of proof, that confession may be thrown out. Meanwhile, we swiftly negotiate a settlement or restructure to avoid further legal exposure. Our entire mission is to safeguard your business and your personal finances.
We can help you, 100%.
Regardless of how dire your MCA default might seem, your path forward could be:
- Debt Consolidation Loans which pay off MCAs
- Direct Negotiation which reduces the factor rate
- Debt Settlement which lowers your overall principal
- Invoice Factoring to generate cash flow for partial paydowns
- SBA Loans for lower interest rates and better repayment terms
EXPERIENCED Attorneys. NYC CRIMINAL ATTORNEYS?
We know it’s shocking, but some MCA default cases have escalated into criminal allegations of fraud when lenders suspect misrepresentation. This is rare – but it underscores the importance of working with an experienced legal team. Our attorneys can help mitigate exposure and shield you from such extremes.
We fight. We protect. We win.
If a lawsuit is pending, we’ll appear on your behalf. If we spot unfair or illegal terms, we’ll move to dismiss. If necessary, we’ll file counterclaims under consumer protection statutes which could apply to certain business loans if the lender’s behavior is egregious. We get it. You want to focus on your business and move on from the stress of an MCA default.
What Should You Do If… You’re Already in MCA Default?
- Talk to Your Creditor – Show good faith, request a temporary forbearance. This can buy you time.
- Contact Delancey Street – We’ll provide a free consultation to see if consolidation or settlement is best. We will give you pros and cons of both solutions, so you know which way works best.
- Review the Contract – See if the MCA includes a personal guarantee, or a COJ. This helps you understand legally which way to go.
- Evaluate All Options – Could SBA financing or invoice factoring salvage your situation? We can give you info on which way to proceed.
- Protect Your Assets – Avoid new MCAs or “stacking,” which can worsen the debt spiral. This will only hasten your push to bankruptcy.
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