A Manual For Merchant Cash Advance And Its Legal Issues

Are you looking for legal aid to resolve your disputes with MCA lenders? If yes, then sit tight as we are here to guide you through the process.

Running a business is a tedious task, and it often requires fast cash to cover short-term business expenses. In such cases, people with a low credit score refer to cash advance options, the problems of which can turn out to be a nightmare for people.

In this article, we’ll talk about these problems, starting from a piece of fundamental knowledge to the associated complications and setbacks. So, without wasting any time, let’s dive right into it!

What Is Merchant Cash Advance?

MCA loan is a financing option in which repayments can be structured in either of the two ways. You can get a forthright amount of money in exchange for a cut of your future credit or debit card sales. You can get upfront cash in the second case, but it will be repaid by reimbursement of daily or weekly debits from your bank account (known as ACH withdrawals).

What You Need To Know

Business owners opt for MCAs because:

· Physical collateral is not required

· They’re quick — the loan is received within a week or so with no heavy paperwork.

· When the sales are down, repayment is adjusted on how well the business is doing.

The benefits mentioned above have been very harmful to many people due to the following downsides:

· With all fees and interest included, the total annual borrowing cost ranges from 30 to 40%, which is a massive percentage.

· With higher business sales, the annual borrowing cost increases.

· As you have to pay the fixed amount, early payment won’t reduce or save your interest.

· MCAs are not subject to federal regulations as they are structured as transactions and not a loan.

· There’s a danger of a disturbed cash cycle due to hundreds of dollars’ daily or weekly payments. These payments can put you at risk of default.

· The contracts of MCAs can be confusing as they may contain unfamiliar terms like purchase price, receipts purchased amount, etc.

· You may be asked to sign a legal document called confession of judgment which can give you a tough time if the company takes you to court.

What Is ACH And What Is ACH Block?

Automated Clearing House (also called ACH) is a U.S. financial network of direct payments. It transfers money from one bank account to another without using paper checks, credit card networks, wire transfers, or cash. In the past couple of years, many fraudulent transfers through the ACH network have been reported.

As ACH frauds make headlines every week, you may feel there is no way of protecting your business, but this is not true. With the use of the ACH block, you will prevent unauthorized electronic transactions before they post to your account. It specifies which companies are allowed to make debits from your accounts. Moreover, it filters all unauthorized debits.

Using the ACH network, you can easily make payments to the people employed at your business. In case one fails to make payments to the MCA company, merchant cash advance block ACH debits. This results in further unrest and mental dissatisfaction.

Legal Issues In Merchant Cash Advance

As per the document signed initially, the MCA company gains access to your business accounts, and this is where issues begin. This happens when a person is unable to sustain a payment schedule. In addition, merchant cash advance block ACH debits.

Moreover, the company interferes with the existing business relationships by contacting your customers and providing them a copy of a document referred to as “confession of judgment.” This document asserts the validity of a legal notice filed by the lending company to publicly obtain the property assets of the debtor.

Regarding confession of judgment, the law changed on August 30, 2019, declaring it unlawful for the person who has a domicile of a state other than New York. This was intended to sigh relief to the people facing merchant cash advance legal issues.

In addition, it was also intended to avoid fraud by corporate companies and prevent consumers’ fear. Unfortunately, this was and still is not seen in practice.

Negotiation With Merchant Cash Advance Company

You can attempt to settle the disputes on your own or hire a lawyer as they know how to negotiate with merchant cash advance company. If you plan on doing things on your own, keep in mind that before you agree to pay or respond to a lawsuit, try settling the debt. Debt settlement involves paying less than what you owe.

Most companies are willing to settle because the legal collection process is expensive and time-consuming for them. In trying to negotiate a settlement on your own, you’ll be at a disadvantage as you’ll probably end up paying a whole lot of amount. This is because they’re a master of the collection process, and you’re new to the scenario.

Instead of proceeding on your own, consider hiring a lawyer to handle merchant cash advance legal issues. By doing so, you’ll have someone to aggressively negotiate a reasonable settlement that your business can afford. Moreover, an attorney will protect your interests and keep you well informed about your rights.

How Do I Get Rid Of Merchant Cash Advance?

Easing the debt burden is the first step towards getting rid of merchant cash advances without creating any problem. This can be done in the following ways:

· Extend MCA repayment terms.

· Apply for a business debt consolidation loan.

· Contact a credit counseling agency and discuss your problem.

· Use asset-backed small business loans as they carry lower interest rates.

The Bottom Line

To sum it, the potential credit arrangements we’ve talked about include resolving debt problems while keeping your business alive. Even the slightest dispute can jeopardize your business. Thus, make sure to contact an attorney who knows how to negotiate with merchant cash advance company before the water goes over the head.