Can’t Pay Back an MCA? You Have Options
While merchant cash advances (MCA) can provide quick cash to business owners in a hurry, they have long-term drawbacks that can entrap borrowers in a financial hole.
Learn what to do if you’re having trouble paying back an MCA.
What is an MCA?
MCAs started in 2009 when banks and lenders stopped loaning money to small businesses during the financial crisis. MCAs were used to fill this gap, but have since become predatory.
In a typical MCA, lenders and borrowers agree to a daily or weekly payback system and in return, the lender receives a percentage of business sales from the borrower. This can become dangerous since lenders receive the same percentage of business sales even when business is slow.
In addition, some of the drawbacks to MCAs include the following:
High-interest rates
The higher the daily sales, the higher the interest rate
Tendency to lead to another MCA
Not federally regulated
What Are the Options for Paying Back an MCA?
While many borrowers decide to take out another MCA to pay off the first one, this is not a good strategy as it can lead to a vicious cycle of borrowing and debt. Instead, the following methods may provide a better alternative for business owners:
Reducing the amount of debt you owe
Negotiating a better repayment plan
Seeking legal guidance
At Jacovetti Law, P.C., our New York merchant cash advance attorney Robert “Bob” Jacovetti can help you negotiate to lower your MCA repayment while your business is in financial distress. Our firm is here to protect your rights against predatory lenders and get your life back on track.
Contact us today at (516) 217-4488 to schedule a free consultation.