Criminal Defense Lawyers

How serious is merchant cash advance debt?

Merchant cash advance debt, which can quickly become unmanageable, is a huge concern for many small business owners. This type of financing is an advance on your future credit card sales, which must be repaid with daily or weekly deductions that can stifle your cash flow. When you combine these frequent payments with high factor rates, you could find yourself overwhelmed, which can lead to big problems for your livelihood.

We are DelanceyStreet.com – a top tier business debt relief company that was founded in NYC and that helps clients nationwide. If your merchant cash advance is toxic, and it’s impossible to keep up, then we can help you with business debt relief solutions.

Understanding Merchant Cash Advances That Were Offered to You
A merchant cash advance that was given to you can seem like a quick fix when you are struggling to keep up with costs, but it often results in mounting fees and overwhelming repayment terms. Merchant cash advance providers withhold a percentage of your daily credit card sales, or require fixed daily debits from your bank account. This strict repayment process can cause serious challenges, which may include late payments on other bills, strained relationships with vendors, and a constant feeling that you are drowning in debt.

When your revenue drops, you may not have enough daily income to meet the MCA repayments plus your normal expenses. This leads to negative cash flow, which can force you to take on more loans, or other forms of financing, just to keep the business operating. As a result, you might soon find yourself “stacking” multiple merchant cash advances, which can crush your cash flow. This situation, where daily or weekly payments keep growing, could push you toward default or out of business entirely.

Why Is Merchant Cash Advance Debt So Serious?
One reason merchant cash advance debt is so serious is because of the extreme interest-like costs. MCAs do not have “traditional interest rates.” Instead, you often pay a factor rate. For example, a $50,000 advance with a factor rate of 1.4 means you repay $70,000. If you repay this over 12 months, your effective APR might be extremely high, which means more of your money goes toward fees instead of building your business.

Another danger: Many MCA contracts have aggressive collection tactics and require you to sign a personal guarantee or a confession of judgment (COJ). A COJ is a legal document that allows the lender to get a judgment against you quickly, with minimal notice. If you default, the lender could freeze your accounts, or even seize assets, which can severely affect both your business and personal finances.

Penalties, Crimes, and Punishment
Failure to repay a merchant cash advance, by itself, is usually a civil matter rather than a criminal offense. However, there are circumstances that might lead to serious legal issues. If you misrepresented information in the MCA application, or if you used fraudulent statements to qualify for the funds, you could face criminal penalties. Fraud that was discovered by authorities, for instance, can result in severe punishment. You could even face fines or possible jail time, which might permanently damage your personal life and career.

Evidence that was illegally obtained by the merchant cash advance provider may be inadmissible in court, which means the lender might lose some of its leverage if the case goes to trial. This is important because lenders often try to gather evidence regarding your finances, personal behavior, and revenue. If the court throws out evidence that was collected improperly, the lender’s case can weaken.

Civil Penalties and Lawsuits:

1. Confession of Judgment Enforcement: If you signed a COJ, the lender might file it with the court, which can result in a swift judgment against you. Once that judgment is in place, the lender can seize your business bank account, garnish your funds, or place liens on your property.
2. Breach of Contract: If you fail to make the agreed-upon payments, the MCA provider can sue you for breach of contract. Lawsuits that are filed against your business can be expensive, and they can lead to forced asset sales or other repercussions that hinder your ability to operate.
3. Credit Damage: If you default on a merchant cash advance, your personal or business credit can be severely harmed, which makes it harder to get new financing. Damaged credit that results from unresolved MCA debt can take years to rebuild, which means less access to growth capital for your business.

Criminal Penalties:

• Fraud Charges: If you mislead the MCA provider about your financial situation or used fake statements, the MCA provider could notify law enforcement, who might bring criminal charges. Penalties that come from fraud can range from fines to prison, depending on the scope of the deception.
• Check Kiting or Bank Fraud: If a business owner tries to move funds around in a deceptive way to avoid MCA payments, that might trigger an allegation of bank fraud. Criminal penalties that emerge from these charges can be life-altering, and they could include jail time, which can obviously destroy your personal and professional relationships.

If you want more information about these issues, check out the Federal Trade Commission at https://www.ftc.gov or the U.S. Small Business Administration at https://www.sba.gov. These government agencies provide details about consumer protection, small business guidance, and potential legal risks.

How DelanceyStreet.com Defends You
We are DelanceyStreet.com, and we focus on business debt relief for clients who need help nationwide. When your merchant cash advance is becoming a nightmare, we offer debt negotiation services that can help reduce the total amount you owe, or stretch out the payment schedule. Our approach includes:

1. Reviewing Your Documents: We analyze the MCA contract, which may contain a confession of judgment clause or personal guarantee. Once we understand the terms, we can spot any unlawful or predatory language. Evidence that was improperly included in the contract may be challenged, which means you could weaken the lender’s position.
2. Negotiating with Lenders: We speak directly to the MCA provider, who might be willing to settle the debt for less than what you owe. Lenders do not want you to file bankruptcy. They would rather recoup some of their money than get nothing at all.
3. Preventing Lawsuits: In many cases, we engage in dialogue with the lender before they file a lawsuit. We can attempt to arrange a new payment plan, or a lump sum settlement, if that’s practical. When you hire us, we handle the calls and protect you from harassing collection tactics, which means you can focus on running your business.
4. Handling Court Proceedings: If a lawsuit was already filed against you, or if you believe there was wrongdoing by the MCA provider, we can guide you through the legal process. Evidence that was wrongfully obtained can be excluded in court, which might eliminate some or all of the MCA provider’s claims.

Strategies That Help You Avoid Criminal Charges
When your merchant cash advance spirals out of control, you might worry about going to jail. While most MCA issues remain civil disputes, it’s important to avoid crossing the line into fraud. We recommend you keep detailed records of where the MCA funds were used, and that you communicate openly with the provider if your revenues drop. If your lender sees that you are honest, it’s more likely they will work with you on a payment arrangement.

Our goal, at DelanceyStreet.com, is to act fast, because speed can help you avoid deeper legal trouble. If an MCA provider accuses you of hiding assets or lying, we will examine their claims. Fraud that was not actually committed by you can be disproven if there is clear evidence to the contrary. If the MCA provider tries to twist your statements to allege fraud, we will fight back, which can keep the matter in civil court rather than criminal court.

Possible Defenses That We Use

1. Faulty Contract Terms: We look for terms that were unclear or misleading. A contract that was written in a predatory way can be challenged. If the court agrees the contract was unfair, the judge can limit the MCA provider’s ability to collect the debt.
2. Lender Misconduct: If the MCA provider failed to disclose true costs or manipulated your business’s payment structure, we can bring those issues to court. We rely on your business bank statements, your revenue data, and any communications you have from the lender.
3. Improper Use of a Confession of Judgment: If the lender used a COJ in a state that does not allow it, or if it was filed incorrectly, we can seek to have the judgment thrown out. When a judgment is voided, the lender’s power to seize your assets might be stopped.
4. Challenging Fraud Allegations: Fraud that was alleged against you must be proved by the lender. If you can show that you reported accurate numbers or that you did not mislead the MCA provider, the lender cannot hold you liable for criminal acts.

Consequences of These Strategies
When these defenses are effective, you can avoid hefty judgments, or you might settle for a lower payoff. You also shield your personal assets, which means you can continue operating your business and avoid personal ruin. If you are cleared of any fraud accusations, you preserve your reputation, which is critical for future financing.

Additional Tips for Managing Merchant Cash Advance Debt

• Open Communication: A lender who hears from you, and understands your situation, may be more willing to negotiate. If you avoid them, they might file a lawsuit or escalate collection efforts.
• Explore Alternatives: Sometimes it makes sense to get a merchant cash advance consolidation loan. If you qualify, you might reduce your overall monthly payment and free up essential cash flow.
• Cut Costs Where You Can: Trim spending on non-essential items, which can help you show the lender that you are serious about repaying debt. This may also improve your monthly cash flow, making it easier to keep pace with a new payment plan.
• Check for Government Assistance: Visit the U.S. Small Business Administration ( https://www.sba.gov ) or the Federal Trade Commission ( https://www.ftc.gov ) for information on small business counseling and consumer protections. These resources can guide you toward solutions or help you understand your rights.

We Help You Get Through This
Our team focuses on effective strategies that protect you from aggressive lenders, and we are proud of our track record in business debt relief. We are owned by an attorney who understands both sides of the negotiation table. If you feel like your MCA debt is crushing your cash flow, it’s time to consider a new approach that reduces what you owe, helps you avoid legal trouble, and keeps you in business.

Why DelanceyStreet.com Is the Best Option

• Two-Pronged Approach: We have a sister-law firm that can step in if lawsuits occur, which means you do not have to scramble for legal representation.
• Proven Track Record: Over 80% of our clients enter into a monthly payment plan with more manageable terms, which means they avoid bankruptcy. Over 80% of our clients also get an additional 1-3 years added to their term, which results in better cash flow.
• Transparent Communication: We pride ourselves on establishing lines of communication with lenders immediately after you join our program. If you need support, we are here to negotiate for you, so you can focus on your business.