Austin Merchant Cash Advance Attorney

Austin Merchant Cash Advance Attorney

Merchant cash advances have become a popular form of alternative financing for small businesses in recent years. However, some merchant cash advance companies engage in predatory lending practices that can harm small businesses. If you are a business owner in Austin struggling with merchant cash advance debt, this article provides an overview of your options and how an Austin merchant cash advance attorney can help.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) provides an upfront lump sum payment to a business in exchange for a percentage of future credit card sales over a set period of time. It is not technically considered a loan, since the business is selling a portion of its future receivables.MCAs are often appealing to small businesses because they:

• Provide fast access to capital, sometimes in as little as 24 hours
• Have simple applications with minimal documentation required
• Use credit card sales versus business credit scores for approval
• Have no set repayment schedule

However, MCAs also come with some major drawbacks:

• Extremely high effective interest rates, often over 100% APR
• Daily or weekly repayments that are a fixed percentage of credit card sales
• Personal guarantees frequently required
• Aggressive collections tactics

Why Merchant Cash Advances Can Be Predatory

While MCAs may seem like an easy financing solution on the surface, they are largely unregulated and some providers use tactics that cross into predatory lending. Here are some of the common issues with MCAs:

• Deceptively high costs – MCA providers quote costs as a “factor rate” instead of an interest rate. But when you do the math, the equivalent APR is typically over 100%.
• Repayment burdens – Daily or weekly repayments that take a fixed percentage of sales can be unmanageable, especially when sales are down. This can lead to a debt trap.
• Aggressive collections – Some MCA providers will contact your customers or freeze your bank account if you fall behind on payments.
• Lack of transparency – MCA contracts often have confusing terms and you may not fully understand the costs or how repayments are calculated.
• Personal guarantees – Requiring business owners to personally guarantee the MCA means your personal assets are at risk if the business defaults.

While MCAs can provide fast access to capital, the extremely high costs and repayment terms often end up doing more harm than good for small businesses. Unfortunately, some providers take advantage of desperate business owners without explaining the downsides.

Your Legal Options If Struggling with MCA Debt

If you are a Texas business owner who is struggling to repay a merchant cash advance, you have legal options and protections. Here are some steps to consider:

Review the MCA Agreement

Carefully review your original MCA contract to understand the terms, costs, and formulas used for repayments. Look for any confusing or contradictory clauses. Also review any personal guarantee you signed. An attorney can help interpret the agreement and identify any unlawful provisions.

Attempt to Negotiate

Contact the MCA provider to explain your situation and request revised repayment terms or a settlement for less than the full balance. Having an attorney communicate on your behalf lends legitimacy to the request. If the MCA provider refuses to negotiate in good faith, that helps build your case.

Understand Your Rights

There are both state and federal laws that may apply to MCAs, even if they are not technically loans. For example, the Texas Finance Code has protections against abusive lending practices. An attorney can advise if any provisions of your MCA agreement violate applicable laws.

Consider Legal Action

If negotiation attempts fail, you may have grounds for a lawsuit against the MCA provider for predatory lending or other unlawful practices. An attorney can assess the merits of potential legal claims based on the specifics of your situation. Common claims include usury violations, RICO charges, and fraudulent misrepresentation.

How an Attorney Can Help

Hiring an experienced Austin merchant cash advance attorney is key to effectively navigate the situation. Here are some of the ways an attorney can help:

• Review the MCA agreement – Identify any unlawful provisions or violations.
• Negotiate with the MCA provider – An attorney has leverage to push for better repayment terms.
• Understand your legal options – Advise if you have grounds for a lawsuit and the likelihood of success.
• File litigation if appropriate – Represent you in any litigation against the MCA provider.
• Defend against collections – Fight improper collections tactics against you or your business.
• Settle debt for less than owed – Negotiate a reduced payoff amount to resolve the debt.

Having legal guidance maximizes your chances of reaching a favorable outcome, whether that involves negotiating a settlement or suing the MCA provider.