Get out of MCA: Escape the grip of Merchant Cash Advances

Struggling with Merchant Cash Advance (MCA) debt?

While MCAs offer the allure of quick capital, they can become financial quicksand if mismanaged.

Let’s unravel the mysteries of MCA’s and help you learn how to disentangle yourself…

Don't take my word for it though. According to a report from the Opportunity Fund, the average annual percentage rate (APR) for an MCA can range from 60% to 200% or more, making them an expensive financing option. 

…but those nice people that help your business access capital told you the 100% truth when you signed, right?

Right?

What is a Merchant Cash Advance?

• Nature of an MCA: An MCA is not a loan in the traditional sense. It's an advance on your anticipated credit card sales. This means that instead of a fixed interest rate, you're charged a factor rate, which can often translate to high costs. However, some advances are a fixed daily draw and can be lumped into the same category as other business cash advances like MCAs.
• Appeal of MCAs: Their appeal lies in their rapid approval rates, minimal documentation, and the lack of necessity for stellar credit scores. It’s the allure of easy money. But as many realize, it comes at a steep price.

MCA's are a high cost form of financing - which isn't terrible if you make a fully-informed decision and it's the best choice for your situation.

However... The Federal Trade Commission (FTC) has been taking action against MCA providers for deceptive marketing practices.

One example - in 2018 , the FTC charged two MCA companies with misleading small business owners about the costs of their financing products.

How to Get out of Merchant Cash Advances

1. Engage in Transparent Communication with Your Lender

• Open dialogue is key. Before considering drastic steps like ceasing payments, talk to your MCA provider. Honesty about your predicament can sometimes lead to temporary relief or a renegotiated payment plan.
• Consider requesting a forbearance — this grants you a short reprieve from payments, allowing your business a breather.

2. Thoroughly Scrutinize Your MCA Contract

• Knowledge is power. Understand the intricacies of your agreement, especially the fine print. Look for a reconciliation clause that might allow adjustments based on actual sales.
• Familiarize yourself with repercussions, so you're not blindsided by the question: "what happens if you default on a merchant cash advance?"

3. Harness the Expertise of Financial Professionals

• Consultation with an accountant or bookkeeper can provide invaluable insights into your fiscal health.
• Together, evaluate your business's revenue, overhead, and ability to handle its debt burden. This can help you get a grip on the scale of your business challenge and potential solutions.

Can You Renegotiate Merchant Cash Advances?

If easy solutions aren’t found, it’s time to consider getting help.

We can connect you with professionals that can help you renegotiate all types of business debt.

They can also warn you of the fallout if you're contemplating the "stop paying merchant cash advance" route…

Protecting your Assets from MCA firms

With (potential) legal action looming, your business and personal assets may be vulnerable. But with meticulous planning, you can shield vital assets.

Focusing on maintaining business operations and safeguarding banking relations during this period is paramount.

You should always work with professionals. The cost of making a mistake is very high.

Starting MCA Settlement Negotiations

Many people use outside help to open settlement negotiations with your MCA provider. These companies can divert the lender's attention, allowing you some breathing room.

Through transparent communication, you can often agree on more manageable terms, reducing the financial strain.

Don’t Ignore Legal Repercussions

If you're already in a lawsuit or if one is imminent due to an MCA default, be proactive.

Responding promptly and effectively to legal actions is essential to prevent exacerbating the situation.

Bankruptcy: The Last Line of Defense

If all else fails, discuss the possibility of bankruptcy with your attorney. While it has lasting implications, in certain circumstances, it might be the best way forward.

A bankruptcy decision should always be made with thorough understanding and professional guidance.

Proactive Steps for Future Security

Avoid Stacking MCAs: Taking multiple advances can be a recipe for disaster. Each additional MCA compounds the financial strain.

Educate Before Committing: Understand the true cost of an MCA. Factor rates can be deceiving.

Consider Alternative Financing: From traditional loans to crowdfunding, several alternatives often provide better terms and less stress.

In Conclusion

A Merchant Cash Advance, while enticing, can spiral into a significant burden.

However, with informed decisions, professional guidance, and a proactive stance, you can navigate the complexities of MCAs and steer your business back to calmer waters.

To get help, call (800) 786-5696 or click the picture below.