Merchant Cash Advance Loans in California – Watch Out for Predatory Lenders!
Merchant cash advances have become super popular with small businesses in California lately. These loans provide quick access to capital by letting you borrow against future credit card sales. At first, they seem like a great flexible financing option. But beware – some of these merchant lenders are totally predatory!
Here’s how merchant cash advances work:
A lender gives you an upfront lump sum of cash. In exchange, they take a cut of your daily credit card and debit card sales until the balance is repaid. There are no fixed monthly payments or payment schedules. Your repayment amounts fluctuate based on your sales volumes.
This flexibility sounds great. But it can turn into a nightmare if your sales drop unexpectedly. You could end up owing WAY more each month than you can afford.
For example, let’s say you got a merchant cash advance for 15% of $10K in monthly sales. That’s $1,500 per month. But then your sales suddenly drop to $5K. Now you’re paying $1,500 on just $5K in sales – 30% of your revenue! Totally insane!
Many California business owners report crazy predatory behaviors from some merchant cash lenders:
– Super high repayment rates that crush your margins
– Daily debits from your bank account that drain you dry
– Harassing nonstop calls from collectors
– Seizing your assets if you default (some lenders sneak in “confessions of judgement” allowing this!)
Unfortunately, confessions of judgement are still standard practice in this loosely regulated industry. So you’re left with little protection if you fall behind on payments.
The good news? An experienced merchant cash advance attorney can help you fight back against predatory lenders.
Here are some of the legal angles they may pursue:
Unconscionable Terms – Argue the loan terms are absurdly unfair and one-sided. If a judge agrees, the contract could be invalidated.
Usury Violations – These loans sometimes disguise interest rates above California’s usury limit of 10% on small loans. This makes them illegal.
Breach of Contract – Review the agreement to see if the lender violated any terms. This could release you from the contract.
Fraudulent Inducement – Prove the lender misled you or lied about terms to convince you to sign. May make contract void.
Debt Settlement – Negotiate with the lender to settle for a lower payoff amount. Avoid risky litigation.
The bottom line? Be really careful with merchant cash advances in CA. Work with an experienced attorney to fight back against any shady lending practices. Don’t get bullied or harassed into unfair repayment terms that could sink your business!