MISSED A BUSINESS LOAN PAYMENT?
This can be frightening – especially if you’re worried about what the lender might do next. Many business loan lenders don’t take this lightly. If you took MCA money – those guys aren’t polite, and can be very rude – to say the least.
We are DelanceyStreet.com – a top tier business debt relief company.
We understand how scary it is when you realize you missed a payment on your business loan, SBA loans, or merchant cash advance. Many MCA lenders are aggressive, and will take you to court the next day.
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Regardless of whether you missed the payment intentionally or not, it’s crucial to act quickly. Because if you don’t, the lender could do things like take your wages, freeze your bank accounts, or file a lawsuit – which might result in you going out of business.
Below we discuss exactly what you need to do when you miss a payment, the potential penalties you face, and a strategy we recommend if things get worse.
STEP #1: GET EDUCATED ON THE LAWS
Learn what your rights and responsibilities are under federal and state laws.
For example, the Fair Debt Collection Practices Act (FDCPA) (see FTC.gov for more info) explains how creditors must behave when they try to collect debts. While the FDCPA primarily applies to consumer debts, some states may have similar laws that extend to small businesses. If your lender violates these regulations, you can take action against them.
Under the Uniform Commercial Code (UCC), lenders may have a right to take collateral if your loan is secured, but they must follow specific legal procedures. If your loan is an SBA loan, you should visit SBA.gov to see how defaults are handled.
Why This Matters:
- Understanding laws helps you stand up for yourself and make sure you’re not being taken advantage of.
- Laws can offer defenses if your lender tries to take your wages, or freeze your bank account.
We are DelanceyStreet.com – a top tier business debt relief company.
We pride ourselves on helping business owners exercise their legal rights.
STEP #2: IMMEDIATELY REVIEW YOUR LOAN AGREEMENT
Go back to the original contract you signed. Look for legal clauses about:
- Default interest rates: Missing a payment could trigger a higher rate.
- Late fees: Lenders will charge late fees or penalties.
- Acceleration clauses: If triggered, the lender could demand the entire balance all at once.
REGARDLESS of how complicated these clauses are, it’s crucial you understand them. Even if you don’t – the lenders do understand them, and they’ll enforce them.
Possible Outcome:
- Some MCA lenders might add a huge penalty fee for even one missed payment, putting your business in deeper debt. Many lenders make more money WHEN you default.
Speak to a seasoned attorney or business debt relief company (like us at DelanceyStreet.com) to interpret the scary portions of your contract.
STEP #3: COMMUNICATE WITH YOUR LENDER
The FIRST thing most business owners forget to do is simply call the lender and explain the situation. Many lenders don’t want you to default/go out of business; they want to simply get their money.
Here’s Why:
- Avoid Additional Penalties: Lenders might waive late fees if you communicate swiftly.
- Prevent Legal Action: Most lenders don’t want you to go out of business or file bankruptcy.
- Set Up a Plan: They may agree to a deferment or modified payment schedule.
Regardless of how upset you are, keep the conversation civil and solution-oriented. Lenders want you to pay. If you show genuine intention to fix the issue, they might be more lenient.
STEP #4: UNDERSTAND THE POTENTIAL PENALTIES
Missing a payment could mean:
- Late Fees: Added to your outstanding balance.
- Credit Score Impact: A negative report to the business credit bureaus, which could hurt your chances of future financing.
- Default and Acceleration: Some lenders escalate quickly, requiring the entire balance due immediately.
- Collateral Seizure: If you pledged assets (equipment, inventory, real estate), the lender might seize them per the UCC guidelines.
- Legal Action: They might file a lawsuit. If you signed a personal guarantee, they could try to take your wages, or bank accounts.
We are DelanceyStreet.com – a top tier business debt relief company.
We’ve seen all of these scenarios – from big banks to merchant cash advance lenders. We understand how to handle them.
STEP #5: HAVE A DEFENSE STRATEGY
If the lender threatens legal action, you need to defend yourself. Below are some strategies we often discuss with our clients:
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Negotiate a Settlement: Our team focuses on business debt settlement.
- Regardless of the loan type, we can try to reduce the principal, lower your interest, or extend your repayment term.
- We often point out potential lender violations or contract ambiguities to secure better terms.
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File a Response if You’re Sued: Failing to respond to a lawsuit can lead to a default judgment. There is no grey zone. You MUST respond.
- We know how to respond to these lawsuits. We might challenge the amount owed, question the validity of the agreement, or highlight any unfair collection practices.
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Seek Injunctive Relief (in extreme cases): If a lender’s actions are unlawful, we can ask a court to stop them from freezing your account or taking your property.
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Check for Violations of FDCPA or State Debt Collection Laws: While some business debts aren’t covered under FDCPA, many states have parallel laws that do.
- If the lender is harassing you, or giving false statements, we can fight it.
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Look Into Debt Consolidation or Restructuring:
- Sometimes you can get a new loan to pay off the old one at a lower rate, or restructure the debt to avoid immediate legal trouble. We help with merchant cash advance consolidations, lines of credit, invoice factoring, and more.
TAKE ACTION NOW because ignoring the problem can lead to bigger issues, including personal liability if you have a personal guarantee.
HOW WE, AT DELANCEYSTREET.COM, DEFEND YOU
- Free Consultation – We review your missing payment situation, your existing loan agreement, your bank statements, and more.
- Contact Lenders – We talk to them immediately, often preventing them from taking extreme measures.
- Leverage Our Relationships – We know how to negotiate with lenders. Many times, they prefer to settle or modify rather than chase you in court.
- Legal Counsel – Our sister law firm, owned by attorney Steven Raiser, helps clients handle litigation and lawsuits if they arise.
- Customized Strategy – Whether it’s paying less overall, or stretching out your monthly payment plan, we find a plan that improves your cash flow.
We are DelanceyStreet.com – a top tier business debt relief company, and we want to ensure your business survives.
TAKE PREEMPTIVE STEPS
Regardless of whether you think you can catch up next month, missing a payment often signals deeper financial problems.
- Cut Costs Where You Can: Lay off unnecessary expenses, renegotiate contracts with vendors, or reduce overhead.
- Explore Government Resources: Check SBA.gov for grants, or local government support that can help you get back on track.
- Consider Balance Transfers (For Credit Cards): Some business credit cards offer 0% APR intro rates, which may let you shuffle high-interest debt temporarily.
- Review Insurance Policies: Certain business insurance policies might provide coverage for unforeseen events that contributed to missing a payment.
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BOTTOM LINE: YOU’RE NOT POWERLESS
A missed payment doesn’t have to end your business. If you take immediate steps and engage in proactive negotiation, you can often avoid going out of business or getting your bank account frozen. But you have to take the first step – and often that means hiring an amazing business debt relief company who can help you.
We are DelanceyStreet.com – a top tier business debt relief company ready to help you address the situation before it escalates.
Contact us now to learn more about your options and how to protect your business.