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-Running a small business is tough. Between managing employees, keeping customers happy, and trying to turn a profit, things can get stressful real quick. And when money gets tight, it’s tempting to turn to alternative financing like merchant cash advances to keep things afloat.But merchant cash advances come with some serious drawbacks. Those easy applications and quick approvals mask crazy high interest rates and fees that can bury a business in debt. No wonder folks call ’em “predatory loans wearing lipstick” – they sure can look pretty at first!So what’s a struggling California business owner to do? Get help from an experienced merchant cash advance lawyer, that’s what. Keep reading to learn why you need a lawyer on your team ASAP if you’ve got merchant cash advance debt piling up.
How Merchant Cash Advances Work
Unlike regular small business loans from a bank, merchant cash advances let you borrow against future credit card sales instead of relying on your business or personal credit score or assets as collateral.Here’s a quick rundown of how they work:
- You apply and get approved for a lump sum of cash upfront
- The lender takes a cut of your daily credit card sales until the balance is repaid (usually 6-12 months)
- The amount they take varies, but it’s often 10-20% of daily sales
- There’s usually no fixed monthly payment amount
Seems simple enough. But hidden fees and sky-high interest rates make these loans crazy expensive. Rates often hit 200-500% APR when all’s said and done! And when you fall behind on payments? Lenders can freeze your bank account or sue you. Yikes!
The Trouble With Merchant Cash Advance Regulation
With such outrageous costs, you’d think there’d be laws to protect borrowers, right?Wrong.Turns out, merchant cash advances live in a regulatory gray area since they aren’t technically loans. That means lenders don’t have to follow state laws that cap interest rates on loans. What a loophole!But after years of complaints over predatory lending practices, some states are trying to extend consumer protections to small biz owners.
-California’s Commercial Finance Disclosure Law
In late 2022, California passed the Commercial Finance Disclosure Law requiring lenders to clearly disclose interest rates and fees on business financing products under $500k. This includes merchant cash advances.The law went into effect December 2022 despite lawsuits from merchant cash advance companies trying to block it. But California’s Attorney General stands behind the law, arguing it gives business owners the info they need to compare financing options.This added transparency makes it easier to spot outrageously priced merchant cash advances. But it doesn’t cap rates or fees. So predatory lending continues.
Fighting Back Against Abusive Lenders
If you didn’t understand the terms or got pressured into a merchant cash advance you can’t afford, contact a lawyer ASAP. An experienced attorney can review your agreement and options for getting relief, including:
Renegotiating the Agreement
If the terms seem unfair or deceptive, your lawyer may be able to negotiate a settlement or payment plan with better rates.
Disputing Fraudulent Tactics
If lenders used shady sales tactics like promising to “fix” your credit or saying you’d only repay 1.5X the amount borrowed, that could count as fraud. Your lawyer can fight to get the agreement voided or damages awarded.
Filing Bankruptcy
Declaring bankruptcy stops collections and wipes out debt you can’t afford. Chapter 7 bankruptcy erases personal guarantees too. Your lawyer will advise if this is your best path forward.
-Challenging MCAs as Disguised Loans
Courts in some states have ruled certain merchant cash advances were actually illegal payday loans in disguise. If so, usury laws would apply to cap rates. Your lawyer can argue the same in your case.
Choose the Right Legal Team
With so much at stake, it’s critical to have an experienced merchant cash advance lawyer in your corner. Look for attorneys with specific experience helping small business owners fight predatory lenders.The American Bar Association and sites like Avvo make it easy to find lawyers with expertise in business debt relief and financial services litigation.Schedule consultations to discuss your situation and options. Many lawyers offer free case reviews. And some take cases on a contingency fee basis, collecting payment only if they win your case.
Take Control of Your Financial Future
Getting trapped in a cycle of predatory business loans happens all too often. Don’t go it alone against unethical merchant cash advance lenders. Call an experienced small business lawyer now to start unravelling unfair agreements and creating a sustainable path forward. With strong legal guidance, you can break free of abusive debts and give your business its best shot at success.
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IF YOU’RE LOOKING FOR A BUSINESS DEBT SETTLEMENT COMPANY, VISIT DELANCEY STREET. CLICK HERE NOW.