New York Merchant Cash Advance Defense Lawyer
Fighting for You & Your Business
Merchant cash advances (MCAs) started in 2009 when small banks and lenders stopped loaning money to small businesses. Initially, MCAs were used to fill this gap, but now the business has become predatory. Many borrowers struggle to pay back their debts in order to avoid losing their businesses.
If you have been affected by a merchant cash advance and need legal assistance, Jacovetti Law, P.C. can help. Our merchant cash advance defense lawyer in New York offers aggressive representation to protect the rights of individuals who have been victimized by MCAs’ predatory practices.
What is a merchant cash advance?
A merchant cash advance is an advance on future revenue, business owners can borrow money for the operation of their business. An MCA isn’t a typical loan; it’s a cash advance based on the credit card sales in a business owner’s merchant account. The payments are deducted from a merchant’s revenue account each day until the advance is paid in full. Most lenders have an affixed amount that they take from the business, even if sales are slow. Ordinarily, it works by a lender purchasing a portion of a company’s future revenue.
How Do Merchant Cash Advances Work?
In a typical merchant cash advance, lenders and borrowers agree to a daily or weekly payback system and in return, the lender receives a percentage of sales or receipts from the borrowers. You would assume that if your business is slow, the daily and weekly payments would reflect the revenue of the business.
Unfortunately, this is not how the system works. Most lenders have an affixed amount that they recover from the business whether the business is thriving or not.
As part of the process, a lender will generally require a person to provide businesses merchant processing statements and bank statements to determine how much of an advance he or she will qualify for. In addition, a credit check may be required in order to qualify.
If approved, the lender will also provide the terms and conditions. The funds are then deposited into the business owner’s account for their use. The payments can then be paid back in a specified time frame.
How Long Do I Have to Pay Back The Advance?
The duration of time in which it takes to pay back the advance may vary due to a number of factors.
Factors impacting how long it takes to pay back a merchant cash advance:
- Fluctuating sales.
- Increased credit card transactions.
- Decline or increase in sales.
The interest rates decrease the longer it takes to pay back the advance, which is why generally many merchants feel there isn’t an advantage to paying off the debt earlier.
Pros And Cons Of Merchant Cash Advances
Some of the benefits to merchant cash advances are:
- Quick Approval Process – Once the requested statements and reports are submitted, the lender will approve or deny the advance. If approved, the money is quickly deposited into the business owner’s account.
- Some Lenders Do Not Require Collateral – The advance is unsecured. However, when a lender provides an unsecured loan they usually require a confession of judgment, which would allow them to restrain a bank account upon default.
- The Amount Of Sales Equate To The Amount Of Payment – The payments vary based on credit card sales. It helps to ensure that a company has enough cash on hand.
While there are many advantages to a merchant cash advance, there are also downsides such as:
- High interest rates
- The higher the daily sales, the higher the interest rate
- Tendency to lead to another merchant cash advance in the future
- Not federally regulated.
What Happens If I Can't Afford Payment?
When borrowers can no longer afford to make minimum payments, they are often unsure where to turn. In this situation, some borrowers choose to borrow from multiple merchant cash advance lenders to pay back the first lender and get themselves into a worse position.
MCA lenders are quick to bring merchant cash advance lawsuits against borrowers who default on payments, so it is important to seek legal counsel immediately if you have defaulted or believe you will default on a payment.
For many small business owners, a merchant cash advance may be the only option in order to continue to grow his or her business. However, it is important to speak with an experienced New York merchant cash advance attorney who can help explore the options that are right for you and your business.
Jacovetti Law, P.C. is experienced in merchant cash advance matters, including debt resolution. Our merchant cash advance lawyers will work with clients to assess their debt situations and advise them on the best path to financial stability.
Confessions of Judgment Agreements
Merchant cash advance lenders can encourage borrowers to sign “confessions of judgment” agreements, which may allow the lender to put a restraint on the borrower's bank account, effectively shutting down the borrower's business when they have not paid.
Confessions of judgment agreements bypass a lender’s duty to prove the elements of their claim and create a serious issue for borrowers.
If you are a borrower who has defaulted on your payment and has signed a confession of judgment agreement, there are limited circumstances that can provide relief. It is important to seek the help of our experienced New York merchant cash advance attorney at Jacovetti Law, P.C.. We can provide options for you to sustain and grow your business.
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Paying back and settling business debts can be very stressful and challenging for many borrowers. We can help make arrangements with creditors and lenders to ensure that you make the necessary payments while also keeping your doors open.
Your main goal as a borrower is to avoid filing for bankruptcy and closing your business. As your advocate, our New York merchant cash advance lawyer can negotiate to lower your daily MCA repayment while your business is in financial distress.
If your company or business is struggling with debt, call Jacovetti Law, P.C. at (516) 217-4488.