Wyoming Merchant Cash Advance Legal Help – Attorneys, Debt Settlement
Merchant cash advances have become an increasingly popular form of financing for small businesses in Wyoming. Unlike traditional bank loans, merchant cash advances provide quick access to capital – often in just days or weeks – with minimal paperwork.However, merchant cash advances also come with risks. If your Wyoming business defaults on repaying one, the consequences can be swift and severe. Lawsuits, account freezes, collection harassment, and severe damage to your business relationships are common outcomes of default.Luckily, experienced Wyoming attorneys can help you navigate merchant cash advance agreements and defend your business if things go south. This article provides an overview of merchant cash advance legal issues in Wyoming and how lawyers can assist.
What is a Merchant Cash Advance?
First, what exactly is a merchant cash advance (MCA)? Essentially, an MCA company provides a business with an upfront lump sum of cash in exchange for a fixed percentage of future credit card sales over time until repaid.For example, a Wyoming bakery might receive a $50,000 merchant cash advance with an agreement to repay it by allowing 15% deductions from each day’s credit/debit card receipts. Repayments automatically come out of each card transaction until the $50K + fees/interest is paid off.Unlike loans, MCAs don’t have fixed monthly payments. The amounts due fluctuate based on sales volumes. This Forbes article explains more on how merchant cash advances work.
-Merchant Cash Advance Risks and Legal Issues in Wyoming
While MCAs provide fast access to capital, they also come with considerable legal and financial risks for Wyoming businesses. Understanding these risks is the first step to avoiding issues:
Extremely High Interest Rates
Merchant cash advance interest rates often exceed 100% APR when fees are factored in. And some MCA contracts contain rates exceeding 200% APR – illegal in many states.Be sure to carefully calculate the true loan cost before accepting an MCA offer. This calculator helps determine your effective interest rate.
Daily/Weekly Payment Fluctuations
The fixed percentage deductions from credit card sales can severely impact cash flow, especially for low-margin businesses. Poor budgeting and planning make it difficult to cover operating expenses after MCA payments.
Short Payback Periods
MCA contracts often contain payback periods of 6-12 months. This leaves little margin for error in repayment – one bad month can put you behind the 8-ball.
-Confessions of Judgement
Many MCA contracts contain “confessions of judgement” clauses. These give lenders a shortcut to obtaining a legal judgement if your business defaults – allowing them to seize assets without a trial. COJs are illegal in some states.
Personal Guarantees
Most MCA agreements require a personal guarantee from the business owner. This leaves your personal assets vulnerable if the business defaults.
Merchant Account Holds & Freezes
Upon default, MCA lenders can instantly freeze the business’s merchant accounts and credit card processing – crippling cash flow.
UCC Filings
MCA lenders use Uniform Commercial Code (UCC) filings to secure repayment of cash advances. These “super lien” filings often give them first priority access to your business assets.
Aggressive Collections & Lawsuits
If a Wyoming business defaults on an MCA contract, lawsuits and aggressive collections are common. MCA lenders pursue judgements, bank levies, asset seizures, and contact vendors/customers about debts.
-Damaged Credit & Relationships
Defaults and aggressive collections damage commercial credit scores and vendor/customer relationships – which can have long-term impacts.
Wyoming Merchant Cash Advance Defense Attorneys
With so much at stake legally and financially, having an experienced business attorney review MCA agreements before signing is critical.The lawyers at Grant Phillips Law have extensive experience representing Wyoming merchants related to merchant cash advances. They can help you:
- Analyze contracts – Review MCA agreements to spot illegal/unenforceable terms related to interest rates, repayment periods, personal guarantees, etc.
- Negotiate agreements – Attorneys can negotiate better MCA contract terms before acceptance. Even small tweaks can save thousands in interest payments.
- Resolve defaults – Renegotiate contracts, refinance agreements, or craft settlement offers to resolve defaults before legal action.
- Defend lawsuits – Challenge lawsuits, judgments, and collection efforts using breach of contract claims and other legal defenses.
- Navigate bankruptcy – File bankruptcy to eliminate or restructure MCA debt and protect business assets.
- Cancel personal guarantees – In certain cases, attorneys can cancel personal guarantees attached to MCA loans. This protects owners’ personal assets.
- Sue for predatory lending – Lawyers can bring lawsuits against MCA lenders for predatory lending practices, UCC violations, usury rate violations, etc.
The key is consulting experienced legal counsel at the first sign of merchant cash advance trouble. Acting quickly gives businesses the best chance of avoiding negative legal/financial outcomes.
-Alternatives to Merchant Cash Advances in Wyoming
Considering the risks, what are some better financing options for Wyoming small businesses? Here are a few to consider:
SBA Loans
Wyoming small businesses should tap into SBA lending programs before resorting to merchant cash advances. SBA loans provide affordable capital with long repayment terms.
Business Credit Cards
Putting expenses on low-interest business credit cards preserves operating cash flow. Cards like the Spark 2% from Capital One offer generous rewards and 0% intro APR periods.
Business Lines of Credit
Securing a business line of credit provides flexible access to capital as needed. Interest rates are much lower than merchant cash advances.
Alternative Online Lenders
Companies like Kabbage and OnDeck provide fast small business loans with more transparency than merchant cash advances.
Asset-Based Loans/Financing
Asset-based loans use business equipment/property as collateral for capital. No need to risk personal assets.
Invoice Factoring
Invoice factoring converts outstanding customer invoices into immediate cash – bridging cash flow gaps.Be sure to explore all business financing options before considering high-risk merchant cash advances in Wyoming. And consult experienced legal counsel to fully understand agreement terms and risks before acceptance. Acting quickly at the first sign of trouble can help mitigate legal and financial damage.