How to Negotiate a Settlement on Your Merchant Cash Advance
A Straightforward Guide for Small Business Owners That Are Looking for Relief

Are you a small business owner who is struggling with a merchant cash advance? Merchant cash advances can be a helpful source of money in emergencies. They can also become a huge burden, especially if you have daily or weekly payments that are hurting your cash flow. At DelanceyStreet.com, we can help you understand your legal options and figure out how to protect your business. Below, you’ll find practical steps for negotiating a settlement on your merchant cash advance, plus key information on penalties, crimes, and ways we defend our clients.

Remember: We are DelanceyStreet.com – a top tier business debt relief company based out of NYC, that helps clients nationwide. We have a sister law firm that can help if lawsuits pop up, or if you need direct representation. Regardless – we can help you.

Understanding What a Merchant Cash Advance Is
A merchant cash advance (MCA) is not a traditional loan that has fixed monthly payments. Instead, it is an advance that was provided based on your future credit card sales. The MCA provider takes a part of your revenue every day, or every week, until the entire sum is paid back. This type of financing can quickly become overwhelming if your business experiences a slowdown, because your daily repayment will not automatically go down if your sales drop.
Consequence: If you can’t keep up with the payments, you risk falling behind on the MCA, which can lead to collection efforts, confessions of judgment, or even legal actions.

Why MCAs Can Become Problematic
Daily Obligations: A payment that is automatically deducted can strain your business’s cash flow every single morning.
Consequence: You may find it hard to pay rent, meet payroll, or purchase supplies, which leads to potential defaults on other financial obligations.

High Factor Rates: Many MCAs charge a “factor rate” instead of a standard interest rate.
Consequence: The total repayment can be significantly more than a typical bank loan, which can cause a cycle of debt or the need for additional MCAs.

Potential Penalties, Crimes, and Punishment
Business owners who are behind on MCAs sometimes worry that they could face criminal charges. Generally, having a debt is not a crime by itself. However, certain circumstances can cause legal consequences. Below are some scenarios, plus related government references:

1. Writing Bad Checks: A merchant cash advance provider who was given post-dated checks might accuse you of writing bad checks if the funds in your account are insufficient.
   Consequence: Writing bad checks can be considered fraud or a criminal offense in many states. For legal definitions, see the Department of Justice website.

2. Fraudulent Paperwork: Any borrower that used falsified bank statements or fake revenue reports to secure an MCA might face severe penalties.
   Consequence: Fraud can lead to fines, restitution, and even possible jail time. Visit FTC.gov for more details on business fraud cases.

3. Violation of Confession of Judgment: A confession of judgment that was signed gives the lender the right to obtain a judgment against you quickly if you stop making payments.
   Consequence: Once a judgment is entered, the lender might try to freeze your accounts or put liens on your property.

Crimes related to merchant cash advances are usually tied to deceit, fraud, or misuse of funds. Punishment could range from civil penalties and large fines to criminal charges, depending on the severity and intent.

Ways We’d Defend You
At DelanceyStreet.com, our team of business debt experts and attorneys can help you fight unfair MCA terms or penalties. Here are some common defenses we use:

1. Contract Review: We investigate any MCA agreement that was signed for illegal clauses or misrepresentation.
   Consequence: If the contract has questionable terms, it can be challenged in court or negotiated to a more favorable settlement.

2. Fraud and Misrepresentation by the MCA Provider: We check if the MCA provider who was giving you funds used misleading statements or failed to disclose real costs.
   Consequence: If a provider acted deceptively, you may have grounds to void parts of the agreement or reduce your balance.

3. Compliance with Local and Federal Laws: We ensure compliance with rules set by agencies like ConsumerFinance.gov and SBA.gov.
   Consequence: If the MCA provider broke important lending regulations, your settlement negotiation gains leverage, meaning they might accept lower repayment terms.

Step-by-Step Guide: Negotiating a Settlement
Are you wondering how to approach your MCA provider? Here is a straightforward process:

1. Gather Your Financial Records
   Collect everything: bank statements, invoices, the MCA contract, and details about all the loans that were taken out.
   Consequence: Having organized documentation makes you look credible and helps you argue for a fair settlement.

2. Assess the Debt and Decide on a Strategy
   Figure out the total you owe, including fees. Then, decide if you want to propose a lump-sum payment or monthly installments.
   Consequence: If you offer a lump sum, you might get a bigger discount on the total owed, but you need enough cash on hand to do so.

3. Open Communication with the Provider
   Send a professional letter or email and follow up with a phone call. Explain your difficulties that were caused by the MCA. Ask for a settlement.
   Consequence: If the lender understands your position, you may avoid a lawsuit or additional penalties.

4. Negotiate the Terms
   Propose new terms that include a reduced principal or a lower factor rate. Show realistic numbers.
   Consequence: A lower principal means you can free up cash for your day-to-day operations, which helps your business survive.

5. Review All Paperwork Before Signing
   Make sure you check every clause carefully, or hire a legal professional.
   Consequence: If you sign without reading, you might unknowingly agree to higher fees or penalties down the road.

Sample Flow Chart
Below is a simplified example of how MCA negotiations might flow:

Business Owner Struggles -> Contacts MCA Provider -> Proposes Settlement
Outcome A: Provider Accepts -> Reduced Balance -> Owner Repays
Outcome B: Provider Rejects -> Potential Lawsuit -> Legal Defense by DelanceyStreet.com

This is just one possible scenario. Every situation is unique, but the idea is to create a clear chain of events so you know what to expect.
Consequence: Having a roadmap means you can anticipate challenges, which helps reduce stress and confusion.

Common Pitfalls to Avoid
Pitfall #1: Not Seeking Legal Advice
A business owner who was not represented might sign an agreement that is unfair or leaves them vulnerable to judgments.
Consequence: You may lose assets or end up paying much more than you owe.

Pitfall #2: Taking Another MCA to Cover Existing Debt
Stacking multiple MCAs can trap you in a cycle of daily repayment that grows worse.
Consequence: It may become nearly impossible to escape debt, and lenders could take aggressive legal steps.

Comparison Table: MCA Settlement vs. Traditional Loan Settlement

Feature	MCA Settlement	Traditional Loan Settlement
Repayment Approach	Daily or weekly deductions that were taken automatically	Monthly installments that are usually fixed
Negotiation Leverage	Factor rate is flexible if default risk is high	Interest rate might be lowered but rarely restructured fully
Documentation	Possible confession of judgment, factor rates	Standard loan agreements with clear amortization
Legal Consequences	Quick judgments, personal guarantees	Slower legal process, fewer immediate personal liabilities

Consequence: By comparing the two, you see how MCA settlement differs from a bank loan settlement in terms of urgency, potential for quick judgments, and daily versus monthly obligations.

Checklist Table: Things to Do Before Negotiating

Task	Completed?
Gather bank statements, MCA contract, and financials	[ ]
Check for confessions of judgment or personal guarantees	[ ]
Decide on lump sum vs. payment plan	[ ]
Organize any correspondence with MCA provider	[ ]
Consult with DelanceyStreet.com or an attorney	[ ]

Consequence: Completing these tasks first will help your negotiation go more smoothly, which can lead to a better outcome.

Legal References & Government Resources
If you want to read more about your rights, you can check out these sources:

1. FTC – Dealing with Debt: The Federal Trade Commission has a page on debt collection practices.
   Consequence: Understanding fair debt collection helps you spot any abusive tactics by an MCA provider.

2. Consumer Financial Protection Bureau: The CFPB offers resources on small business financing.
   Consequence: You can learn more about your rights and potential ways to report unfair practices.

3. SBA.gov: The Small Business Administration provides guidance on loans, grants, and business advice.
   Consequence: Getting additional funding might help you replace high-cost MCAs with lower-cost debt.

Final Thoughts: Moving Forward Confidently
Are you feeling overwhelmed by your merchant cash advance? Do you believe your daily payments are crushing your cash flow? At DelanceyStreet.com, we understand the challenges you face, and we’re prepared to help you find relief. The most important step is to stay calm, get organized, and speak to experts who can guide you through the negotiation process. Remember, lenders who are approached with a reasonable offer often prefer to settle rather than spend time and money on lawsuits.
Consequence: When you negotiate and settle, you keep your business running smoothly, protect your assets, and avoid the harsh punishments that can arise from ignoring the debt.

If you need help settling your MCA, or if you’re concerned about potential legal consequences, reach out to DelanceyStreet.com today. We focus on strategic solutions, starting with open communication and proven negotiation tactics. Our objective is to reduce the total debt owed, get you lower interest rates if possible, and help you maintain control of your finances. Because we are owned by an attorney, we have unique insight into potential legal defenses and ways to protect you in court. This dual approach – business debt settlement plus legal know-how – sets us apart.