San Diego Merchant Cash Advance Attorney: Your Guide to MCA Debt Relief
Merchant cash advances (MCAs) have become an increasingly popular form of alternative financing for small businesses in San Diego. Unlike traditional bank loans, MCAs provide quick access to capital without requiring strong credit or lengthy applications. At first glance, they seem like a flexible financing option. But merchant cash advances come with major downsides that can put San Diego business owners in a dangerous debt cycle.This article will cover everything you need to know about merchant cash advances in San Diego, including how they work, their pitfalls, and most importantly – your legal options if you‘re struggling with crippling MCA debt.
How Do Merchant Cash Advances Work in San Diego?
Here’s a quick rundown of how merchant cash advances work:
-- A lender provides an upfront lump sum of cash to your San Diego business. This can range anywhere from $5,000 to over $500,000.
- In exchange, the lender takes a percentage of your daily credit card and debit card sales until the balance is fully repaid. There are no fixed monthly payments.
- Repayment amounts fluctuate based on your sales volumes. If sales are up, you repay more. If sales are down, you repay less.
This flexibility seems great on the surface. But it can quickly spiral out of control if your sales unexpectedly decline. You may end up owing far more each month than you can realistically afford.For example, let’s say you got a $30,000 merchant cash advance at a factor rate of 1.4. That means you’ll repay a total of $42,000 including fees. If you were doing $10,000 in monthly sales when you got the MCA, the $1,400 monthly payment is reasonable. But if your sales suddenly drop to $5,000, now you’re paying $1,400 on just $5,000 in revenue.As you can see, falling behind on merchant cash advance payments can happen fast. San Diego business owners need to understand the risks before signing an MCA contract.
The Pitfalls of Merchant Cash Advances in San Diego
While MCAs seem straightforward at first glance, they come with major downsides that trip up many small business owners:1. Excessively high repayment rates – MCA companies charge factor rates ranging from 1.1 to 1.5. That means you’ll repay 10-50% above the original advance amount. This equates to an APR of 60% or more in many cases – much higher than a bank loan.2. Daily debits from your bank account – MCA companies can debit your account every day for the agreed-upon percentage of sales. This can drain your account and make it tough to cover other expenses.3. Aggressive collections – If you fall behind, MCA providers may engage in aggressive tactics like harassing phone calls, lawsuits, or freezing your bank account. Some may even contact your customers directly for payment.4. Personal liability – With an MCA, you as the business owner are personally responsible for the debt. The MCA provider can come after you legally and garnish your wages if your business defaults.5. No regulations – Unlike loans, MCAs are not subject to usury laws or other regulations restricting interest rates and lending practices in California.As you can see, merchant cash advances contain multiple pitfalls for San Diego small business owners. The flexibility and easy access to capital comes with major risks.
Your Legal Options for MCA Debt Relief in San Diego
If you‘re saddled with crushing MCA debt, don’t panic. You have legal options and protections under California law. Here are a few potential avenues for pursuing MCA debt relief:Negotiate a Settlement – Work with an attorney to negotiate a lump-sum settlement with your MCA provider. You may be able to settle for 20-50% of the outstanding balance. This can save you from drawn-out legal battles.File Bankruptcy – Filing for Chapter 7 or Chapter 11 bankruptcy may discharge part or all of your MCA debt. This stops collections and gives you a fresh start. Learn more about using bankruptcy for MCA debt relief here.Dispute the MCA Contract – If you were misled about repayment terms or feel the MCA contract is unfair, your attorney can fight to get it voided or modified to lower your payments.Sue for Violations – You may have grounds to sue your MCA provider for violating lending laws, harassing you, illegally accessing your accounts, or other misconduct.Defend Yourself in Court – If you’re sued for defaulting on an MCA, a knowledgeable attorney can build a strong defense to fight the lawsuit.The right debt relief strategy depends on your specific situation. For example, if the MCA provider is engaging in unlawful collection tactics, suing them for violations may be the best approach. If you simply cannot afford the payments anymore, bankruptcy or settlement could provide the fastest relief.An experienced San Diego MCA debt attorney will review your case details and advise you on the optimal legal strategy. Don’t try taking on an MCA provider alone.