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MCA Defense Lawyers Business Debt Settlement
Businesses can accumulate substantial debts for a variety of reasons – economic downturns, cash flow issues, expansion costs, and more. When debts become unmanageable, business owners may turn to merchant cash advance (MCA) companies for quick financing without realizing the extremely high interest rates and aggressive collection tactics utilized by some MCA lenders. If your business is facing legal action from an MCA company, specialized legal defense can help protect your assets.
How MCA Loans Work
Merchant cash advances provide businesses with lump sum payments in exchange for a percentage of future sales over a set period of time. This type of financing appeals to business owners because:
- There is no lengthy credit check – MCAs base approval on a business’s payment processing history.
- Funds can be accessed quickly – often within a few days of application.
- Payments fluctuate with sales revenue – businesses pay back more when revenue is higher.
However, the convenience and flexibility of MCA loans come at an extremely high cost:
- Advance rates typically range from 1.10 to 1.50. This means for every $1,000 borrowed, businesses repay $1,100 to $1,500. These rates translate to Annual Percentage Rates of 60% or more.<sup></sup>
- MCA agreements usually include aggressive repayment terms that deduct daily or weekly payments at very high percentages – often 30-35% of daily credit card sales.
Within months, struggling businesses can owe double the original loan amount. Default can trigger immediate demands for full repayment and lawsuits.
Legal Action Initiated by MCA Lenders
When businesses fall behind on payments, MCA lenders frequently pursue legal action including:
- Breach of contract lawsuits – These lawsuits demand immediate repayment of outstanding balances plus extremely high default interest rates.
- Confessions of judgement – Borrowers may have unknowingly signed these as part of their MCA agreement, allowing lenders to obtain judgements without advance notice.
- Merchant processor account garnishment – MCA lenders can legally gain control of businesses’ merchant accounts to collect payments.
Lenders also report defaults to credit bureaus immediately, before any judgement occurs, damaging the business’s credit rating.
Available Defenses Against MCA Lawsuits
If an MCA lender initiates legal action against your business, working with knowledgeable attorneys provides the best chance to defend against judgements and garnishment of business assets. Defenses may include:
Unconscionability
- MCA contracts often contain one-sided terms blatantly favoring lenders over borrowers. This may make agreements invalid due to unconscionability.<sup></sup>
- Factors courts consider include:
- Deception or high-pressure tactics during contract signing
- Unreasonably favorable terms for the lender
- Significant imbalance in parties’ power or sophistication
Breach of Covenant of Good Faith
- All contracts carry an implied covenant of good faith requiring fair dealings between parties. However, MCA tactics like aggressive collections or account garnishment may breach good faith covenants.<sup></sup>
- If lenders do not exercise discretion reasonably or in accordance with common sense and decency, agreements become legally unenforceable.
Fraud and Misrepresentation
- Evidence showing lenders misrepresented or failed to fully disclose repayment terms, interest rates, or other crucial agreement details may support fraud claims.
- Bait-and-switch schemes leading borrowers to believe they were approving one type of financing only to find out later terms were entirely different can invalidate contracts.
Why Legal Representation Matters
Navigating complex MCA defense strategies requires extensive courtroom experience and a thorough understanding of contract law. With so much at stake, businesses should not attempt to face lenders’ attorneys on their own. Retaining knowledgeable lawyers levels the playing field.Benefits of working with specialized MCA defense attorneys include:
In-Depth Case Evaluation
- Attorneys determine the strongest legal arguments to assert based on the specific circumstances.
- They identify any improper actions by lenders that could invalidate agreements.
- Analyzing risk allows development of well-reasoned negotiation strategies aiming for optimal settlements.
Courtroom Advocacy
- Seasoned litigators handle all aspects of representing clients in court.
- They counter aggressive filings by lenders attempting to quickly obtain judgements.
- Skilled presentation of evidence and questioning of plaintiff witnesses can undermine lenders’ arguments.
Settlement Negotiations
- Experienced attorneys determine realistic settlement goals and negotiate firmly but strategically with lenders.
- Their courtroom reputation and ability to argue complex contract defenses incentivizes settlements on favorable terms.
By understanding available defenses and advocating strongly for fair remedy resolutions, knowledgeable MCA defense lawyers provide the best chance for positive outcomes allowing businesses to move forward.
About Delancey Street Associates
While we cannot offer legal advice or representation, Delancey Street Associates provides professional services assisting businesses in financial crisis. We have extensive experience negotiating settlements of unsecured business debts – including MCA loans. Our dedicated team works directly with your attorney to develop and implement strategies aiming for the most favorable resolutions possible. Services include:
- Business solvency analysis – We construct a detailed assessment of your current financial position highlighting strengths and weaknesses creditors consider when determining settlement options.
- Financial restructuring proposals – Our proposals outline reasonable repayment plans based on verifiable business valuation and financial data. These alternatives incentivize creditors to reach settlements.
- Settlement negotiations – We negotiate firmly but fairly with creditors’ attorneys and collection agencies to argue for acceptance of our proposed repayment terms.
- Debt management plans – For creditors accepting settlements, we establish affordable periodic payment plans, allowing businesses to satisfy obligations over time without further legal action.
While facing MCA loan default can be an extremely challenging situation, taking proactive steps – with the support of experienced professionals – provides the best opportunity to safeguard your business assets and move forward on steady footing. We encourage any business owner dealing with an MCA lender lawsuit or aggressive collections tactics to connect with us for a free consultation. Our team is always willing to help evaluate the full scope of debts owed and provide tailored advice for your unique situation.
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