A merchant cash advance is a type of financing that was designed to help small businesses get quick capital. This type of financing can be tempting, because it seems like fast money that will solve a cash flow problem. A merchant cash advance that was approved quickly may seem ideal, but it often comes with high fees, daily or weekly repayment schedules, and a risk of serious legal consequences if you default. We, at DelanceyStreet.com, are a top-tier business debt relief company based out of NYC that helps clients nationwide. Our goal is to help you get out of a merchant cash advance so you can keep your business going.

UNDERSTANDING THE MERCHANT CASH ADVANCE
A merchant cash advance (MCA) is an agreement that was created by lenders to buy a portion of your future sales. The MCA provider that was giving you funds usually collects repayments automatically from your credit card transactions. This daily or weekly deduction might feel manageable at first, but it can quickly drain your cash flow.

Result: When your cash flow is tight, you may have trouble covering rent, payroll, or important bills. If this goes on for too long, you can be at risk of defaulting on your agreement, which can lead to lawsuits or the dreaded confession of judgement (COJ) getting triggered.

WHEN THINGS GO WRONG: PENALTIES AND PUNISHMENTS
Many business owners who default on merchant cash advances worry about criminal charges. Most defaults on MCAs are civil matters, which can lead to judgments against you. However, if there is evidence that you committed fraud, it can potentially become a criminal matter. Fraud that was discovered by an MCA provider may bring about large fines, a lawsuit, or even jail time in extreme cases.

Result: Lawsuits can allow MCA providers to seize your business assets or freeze your bank account. If the situation escalates, it might involve law enforcement agencies, because fraud is a criminal offense.

FOR FURTHER INFORMATION
Visit https://www.ftc.gov or https://www.consumerfinance.gov to learn more about unfair lending practices and consumer protections. These agencies that were created by the government have guides and warnings that can help you recognize red flags in your financial agreements.

WHY A COJ (CONFESSION OF JUDGEMENT) IS DANGEROUS
A confession of judgement is a document that was often used by merchant cash advance providers to speed up the collection process. This document that was signed by a business owner allows the MCA provider to obtain a judgment against you without a full trial. It is basically your pre-approval for them to collect if they claim you defaulted.

Result: Once the COJ is activated, the lender can garnish your bank accounts. The lender that was granted a COJ can also contact the sheriff to seize equipment, if necessary. This can cripple your business and destroy your personal finances.

LEGAL INFORMATION AND CREDITOR STRATEGIES

1. Demand Letters
   A demand letter is a letter that was sent by the MCA provider’s attorney. It warns you about missed payments or violations of your contract. A demand letter that was ignored can lead to court proceedings, which may then result in immediate judgments against you.

   Result: If you do not respond, the MCA provider might think you are purposely avoiding repayment. That can prompt them to file a lawsuit sooner, which forces you into a more defensive position.

2. Lawsuits and Judgments
   A lawsuit that was initiated by an MCA provider can move quickly, especially if you signed a COJ. Once a judgment is obtained, the MCA provider might garnish your business income or place liens on your property.

   Result: Liens can stop you from selling your property. Garnishments can make it impossible to pay other urgent bills and keep your business running.

3. Potential Criminal Charges
   Most MCAs end up in civil court, but in rare cases, allegations of fraud can arise. Fraud that was alleged by an MCA provider might happen if you provided fake statements or lied about your revenue.

   Result: If proven in court, fraud can lead to criminal penalties, which may include fines or even time behind bars.

HOW DELANCEYSTREET.COM WOULD DEFEND YOU
We focus on protecting your business and your personal assets by using many strategies. Our attorneys who are experienced in negotiation may contact your MCA provider directly to seek a debt settlement that is manageable.

• Negotiation: We try to reduce the total amount owed.
• Debt Restructuring: We aim to arrange a longer payment term, which might lower your weekly or daily payments.
• Legal Defense: We defend you in court if an MCA provider files a lawsuit, and we fight to protect your assets from immediate seizure.

Result: When we protect you, we help keep your business afloat, which in turn helps you avoid bankruptcy. We prioritize your financial stability, so you can refocus on making your business succeed.

STRATEGIES FOR GETTING OUT OF A MERCHANT CASH ADVANCE

1. Communicate With the Lender
   A lender that was kept in the loop might be more willing to restructure your payments. Lenders want to get paid, so they often prefer negotiating over lawsuits.

   Result: If the lender agrees to a new repayment plan, you can gain the breathing room you need for your cash flow.

2. Obtain a Consolidation Loan
   A business debt consolidation loan that was used properly can pay off your MCA. Then, you can have just one monthly payment with a lower interest rate or longer term.

   Result: This means you spend less each month on debt service, which can stabilize your cash flow.

3. Look Into Invoice Factoring
   Invoice factoring that was utilized effectively can provide an immediate cash boost by selling unpaid invoices to a factoring company. This money can be used to pay down part of your MCA.

   Result: Your daily obligations to the MCA might shrink if you use the factoring funds to reduce your outstanding balance.

4. Cut Costs Immediately
   Costs that were unrelated to your core business might be trimmed. This could include canceling unnecessary subscriptions, negotiating lower rent, or switching to cheaper suppliers.

   Result: This frees up more cash, so you can allocate extra money to your MCA balance and reduce the total due more quickly.

5. Consult an Attorney
   An attorney who was trained in debt relief can spot any hidden fees or illegal terms in your MCA contract. Also, an attorney might help you prevent a personal guarantee from being enforced if the MCA agreement was flawed.

   Result: Successful legal defense can stop a creditor from seizing your personal assets. It can also lead to a settlement that is more beneficial for you.

FLOW CHART: ESCALATING MCA PROBLEMS
Situation A -> Default on Daily Payments -> Consequence: Demand Letter
Situation B -> Demand Letter Ignored -> Consequence: Lawsuit / COJ Activation
Situation C -> Judgment Entered -> Consequence: Garnishment or Asset Seizure

This simplified chart shows how an MCA can escalate if you fail to act quickly.

CRIMES THAT ARE SOMETIMES RELEVANT

• Fraudulent Representation: Fraud that was committed by a business owner can lead to criminal charges.
• Check Fraud: Issuing checks that you know will bounce might trigger charges.
• Misappropriation of Funds: Money that was intended for MCA repayment but was diverted for personal use might be questioned in court.

Result: If convicted, an owner might face fines or jail time. Also, the court might order restitution, meaning you pay back the lender.

COMPARISON TABLE: MERCHANT CASH ADVANCE VS. BUSINESS TERM LOAN

Aspect	Merchant Cash Advance	Business Term Loan
Repayment Method	Percentage of daily/weekly credit card sales	Fixed weekly/monthly payment
Interest Structure	Factor rate (often 1.3 – 1.5)	Traditional APR
Speed of Funding	24-48 hours typically	1-2 weeks (sometimes longer)
Risk of Confession of Judgement	High (common in MCA contracts)	Low (usually not included)
Impact on Cash Flow	Can be severe if sales drop	More predictable, easier to budget

Use this table to understand why a merchant cash advance can be riskier and more expensive than a traditional loan.

FAQ QUICK-REFERENCE TABLE

Question	Quick Answer
“What if my MCA contract has hidden fees?”	An attorney who is experienced in business debt can review it and dispute unfair terms.
“Will I go to jail for missing payments?”	Most of the time, it’s a civil matter, but fraud that was discovered can lead to charges.
“Should I file bankruptcy?”	Talk to an advisor first. Bankruptcy that is rushed might be more harmful than helpful.
“Can I stop ACH withdrawals?”	You can ask your bank to stop them, but be aware it might trigger a default.
“Will my personal guarantee be enforced?”	It depends on your agreement. Some personal guarantees that are flawed can be challenged.

STATEMENT + CONSEQUENCE EXAMPLES

• Statement: Evidence that was collected by the MCA provider may include your emails and financial records. Consequence: This means they can use that information in a lawsuit to prove that you breached the agreement.
• Statement: A lawsuit that was filed by the MCA provider can end in a judgment. Consequence: This means they can garnish your accounts or seize business assets.
• Statement: Funds that were borrowed under false pretenses might appear fraudulent. Consequence: This means you could face potential criminal penalties if the court determines you intended to deceive the lender.

TAKE ACTION BEFORE IT’S TOO LATE
Sometimes, you might feel tempted to ignore the debt. This is a mistake that can lead to bigger problems. Legal problems that were left unaddressed can spiral out of control.

Result: You could end up in court, facing wage garnishments, seized assets, and destroyed credit.

HOW WE CAN HELP YOU
We, at DelanceyStreet.com, are committed to helping business owners who are overwhelmed by merchant cash advances. We use powerful strategies to negotiate with MCA providers. We focus on preventing lawsuits, and if lawsuits are already filed, we defend you with our experienced legal team.

Result: Our involvement can make it harder for MCA providers to bully you into a settlement that is unfair.