South Carolina Merchant Cash Advance Attorney – A Helpful Guide for Small Businesses
Merchant cash advances (MCAs) can seem like an easy way for small businesses to get quick capital, but they often lead to serious financial troubles down the road. If you’re a South Carolina business owner who has entered into an MCA agreement that you’re now struggling to repay, this guide can help you understand your options and legal rights.As an experienced South Carolina MCA attorney, I’ve seen far too many good businesses crippled by predatory MCA lending practices. My goal with this guide is to help business owners like you avoid the legal pitfalls of MCAs and connect you with resources to get your company back on track financially.
What is a Merchant Cash Advance?
A merchant cash advance provides an upfront lump sum payment to a business in exchange for a percentage of future credit card sales. It is not technically considered a loan, so MCA companies can skirt state laws capping interest rates.Here’s a quick rundown of how MCAs work:
-- You receive a large cash payment upfront, usually between $5,000 – $500,000
- The MCA company takes a fixed percentage of your daily credit card sales (usually 10-20%)
- You make daily or weekly payments until the balance is repaid (often in 6-18 months)
- There is no set repayment schedule – the amount due fluctuates based on sales volume
- MCAs typically have effective APRs over 100%, sometimes exceeding 300%
Unlike a term loan, there is no fixed end date with an MCA. You make payments until the full balance plus fees and interest are repaid.
The Pitfalls of Merchant Cash Advances
While MCAs may seem like an easy fix for cash flow issues, they come with major downsides for borrowers:
- Extremely high effective interest rates – MCA rates often exceed 100% APR when fees are factored in. This makes them far more expensive than conventional loans.
- Fluctuating payments – Since there is no fixed repayment schedule, your payments go up when sales are good and down when sales are slow. This makes it hard to budget.
- No collateral – MCAs are unsecured, so the business owner has personal liability. The MCA company can sue you directly if the balance isn’t repaid.
- Daily debits from bank account – MCA companies take payments directly from your checking account daily or weekly. This can lead to overdraft fees if funds are low.
- Short repayment periods – Most MCAs must be fully repaid within 6-18 months. This aggressive repayment schedule puts extreme pressure on cash flow.
- Opaque terms – MCA contracts are notoriously vague and confusing. Key terms like the payback percentage, fees, and APR are often obscured.
- Difficult early repayment – Many MCA contracts penalize business owners for trying to repay early. This makes it hard to refinance with better terms.
Common MCA Company Tactics to Watch Out For
Some MCA companies engage in predatory tactics to trap business owners in debt:
- Misrepresenting the true cost – Sales reps often mislead borrowers about the effective APR and total repayment amount. Always demand written terms.
- Making false promises – MCA companies may falsely promise that improving sales will let you pay back the advance faster. In reality, the opposite is true.
- Requiring a confession of judgement – Many contracts force you to confess judgement upfront, allowing the MCA company to seize assets without notice.
- Aggressive collections – MCA companies are quick to harass late payers with threats of lawsuits, bank levies, and asset seizures.
- Freezing merchant accounts – MCA lenders will often freeze your credit card processing account if you fall behind on payments. This leaves you unable to conduct business.
- Filing UCC liens – Some MCA companies put blanket liens on the business to seize assets in case of default. This damages your credit.
- Renewing advances – When nearing payoff, MCA companies may offer renewal advances with hefty fees to keep you locked in debt.
When to Contact a South Carolina MCA Attorney
If you find yourself in any of these situations with an MCA company, it’s important to speak with a qualified attorney about your options:
-- You defaulted on payments and are facing threats of a lawsuit or bank levy
- An MCA company has filed a lawsuit against you personally for the debt
- You can no longer afford the payments and need to restructure terms
- Shady sales tactics were used or terms were misrepresented to you
- The MCA company froze your merchant processing account
- An MCA company filed a UCC lien on your business assets
- You want to explore options for negotiating a settlement
A knowledgeable attorney can advise you on the best response and represent your interests in legal disputes with MCA companies. Acting quickly is critical, as waiting too long can allow the MCA company to obtain judgments against you.
4 Ways a South Carolina MCA Attorney Can Help
Hiring an attorney experienced in MCA cases can be extremely beneficial. Here are some of the ways we can help protect your interests:
1. Reviewing the MCA Contract
We will carefully examine your MCA contract to look for prohibited terms, excessive fees, or other elements that may provide leverage for renegotiation or cancellation. Shady MCA companies often include illegal provisions that can be challenged.
2. Defending Lawsuits
If an MCA company files a lawsuit over missed payments, we will aggressively defend your case. Our goal is to have the lawsuit dismissed, buy you time to repay, or reduce the judgement amount. We fight back against abusive litigation tactics.
3. Negotiating Better Repayment Terms
In many cases, we can negotiate with the MCA company to significantly reduce your payments, fees, and interest rate. We leverage contract weaknesses and legal arguments to reach a fair settlement.
-4. Helping Refinance Your MCA
If negotiating with your current MCA company fails, we can help you identify refinancing options with better terms. There are ethical lenders willing to buy out predatory MCA debts.
Know Your Rights Under South Carolina Law
South Carolina currently has no laws specifically regulating MCA lending. However, some general laws still apply:
- Usury limits – MCA companies cannot charge interest exceeding 8% APR unless they have a state lending license. We scrutinize fees to identify usury violations.
- Unfair trade practices – Scamming borrowers with deceptive marketing or abusive collection tactics may violate SC’s Unfair Trade Practices Act.
- Right to presentment – MCA contracts that waive your right to be notified before a lawsuit may be challenged as improper.
- Confessions of judgement – SC law contains procedural requirements for any confession of judgement signed by the borrower. Non-compliant ones can potentially be reversed.
While MCA regulation in South Carolina remains minimal today, we actively advocate for reforms to protect business owners just like you. There is growing recognition nationwide that stricter oversight of the MCA industry is needed.
-Beware MCA Debt Relief Scams
Many so-called “debt relief” companies promise to easily eliminate or reduce your MCA debts. However, most of these offers are scams that leave you in even worse shape. Here are some red flags to watch out for:✘ Charging large upfront fees before providing any services✘ Guaranteeing they can remove 100% of your MCA debt✘ Telling you to stop making payments to your MCA provider✘ Offering “new” MCA products to consolidate debts that turn out just as bad✘ Pressuring you to sign documents without reviewing them✘ Lacking any licensed attorneys on staffYour best bet is working directly with a qualified MCA attorney from a reputable law firm. We provide honest assessments of your options and follow ethical business practices.
Finding the Right South Carolina MCA Attorney for You
If you decide to pursue legal assistance with your MCA issues, make sure to choose an attorney with specific experience in this unique field. Here are some tips:
- Search for MCA/debt relief expertise – Avoid general practice attorneys unfamiliar with the intricacies of MCAs.
- Ask about their track record – A strong history of favorable MCA case outcomes is a good sign.
- Discuss their negotiation tactics – Do they take an aggressive approach or pursue cooperation? Make sure it aligns with your goals.
- Review costs upfront – MCA attorneys typically work on a contingency fee basis but understand all expenses.
- Check for client reviews – Online reviews can offer insight into others’ experiences with the attorney.
- Meet virtually first – Many attorneys offer free virtual consultations so you can get acquainted.
- Compare multiple options – It’s wise to consult with a few MCA attorneys before deciding on representation.
Don’t rush into signing an attorney retainer agreement. Make sure you feel confident they are the best fit for you and will fight to protect your interests.
Alternatives to Litigation
While legal action is sometimes necessary against predatory MCA companies, there are also alternatives that may be effective:
- Direct negotiation – Discuss hardship openly with the MCA provider and request modified terms. Some may cooperate.
- Debt consolidation loan – Banks or online lenders can potentially pay off your MCA balance entirely through a consolidation loan. This simplifies payments with better rates/terms.
- Payment plans – If the MCA company won’t negotiate, propose a reasonable payment plan that works with your budget. Get any agreements in writing.
- Debt settlement – Debt settlement companies can negotiate lump-sum payoffs at a discount, but this stays on your credit report.
- Bankruptcy – Filing for bankruptcy stops collections and can discharge MCA debts, but causes long-term credit damage.
- Selling assets – As a last resort, selling unused company assets can provide funds to eliminate MCA debts.
Consult with both a financial advisor and attorney to decide which approach is best for your situation. The right solution depends on your business’s financials and the willingness of the MCA provider to cooperate.
Final Tips for South Carolina Small Business Owners
Avoiding legal trouble with MCA companies starts with not taking on more debt than your revenues can sustain. But if you find yourself in over your head, here are some final tips:
- Act quickly at the first signs of unmanageable payments – waiting makes matters worse.
- Be upfront with your attorney about the full scope of your debts and financial status. Transparency helps them best advise you.
- Stay organized – Keep detailed records of all communications, contracts, payments, sales reports, etc related to your MCA. This aids your legal case.
- Don’t panic – Even severe legal threats like lawsuits can often be resolved short of a catastrophic judgement. Focus on sensible solutions.
- Consider alternatives like debt consolidation before jumping straight to litigation, if appropriate.
- Don’t close accounts – Never close your business bank accounts or credit cards in attempt to evade MCA payments, as this will hasten legal action.
- Protect assets – Speak with your attorney about transferring vulnerable assets to insulate them from potential seizure.
With the right legal guidance, a struggling South Carolina small business can regain solid financial footing and move forward. The unethical practices of some MCA companies can be fought back against. There are always better solutions than simply giving up and closing up shop for good.