- The remaining balance
- Interest rate and fees
- Payment amount and schedule
- Any penalties for late or missed payments
This information will help you make a case for renegotiating and come up with alternative terms to propose.Understand Your RightsMerchant cash advance companies are not regulated in the same way as banks and lenders. However, some state laws do provide certain consumer protections. For example, New York’s usury laws cap interest rates on loans under $250,000 at 16 percent.While an MCA technically isn‘t a loan, having an understanding of your rights under state law can help in discussions with the MCA provider. If excessive rates or fees seem predatory, this may be used as leverage when asking for better terms.Approach the MCA CompanyOnce you’ve gathered all the pertinent information, reach out to your MCA provider directly. Frame the conversation in a collaborative, win-win manner. For example:“I wanted to discuss the possibility of renegotiating the terms of my merchant cash agreement. Making the daily payments has become difficult for my business. I believe we could come to an arrangement that works better for both of us.”Be prepared to share the financial details that demonstrate why the current terms are unworkable. Then, suggest alternative payment options that are more affordable for your business.Some possibilities include:
- Lower daily payment amount
- Interest rate reduction
- Longer repayment term
- Interest-only payments for a set period
The MCA company will likely try to steer the conversation toward making late payments current again. However, stand firm in stating that is not feasible and renegotiation is needed.Get Requests in WritingAny tentative agreements you reach with the MCA provider should be put in writing. Follow up phone calls or in-person meetings with an email summarizing the discussion.For example:“Thank you for speaking with me today regarding my merchant cash advance agreement. As we discussed, the new terms we have agreed to are as follows:
- Daily payment reduced from $100 to $75
- 6-month interest-only period beginning DD/MM/YYYY
- After interest-only period, remaining balance will be amortized over 18 months
Please reply to confirm your agreement with these updated terms for my merchant cash advance.”This documentation provides legal proof of both parties consenting to modified terms. If the company later attempts to backtrack, you have evidence to demonstrate the new agreement.Consider Debt RefinancingIf the MCA provider refuses to renegotiate or only offers minimal concessions, debt refinancing may be a better solution. You can work with a business lender to pay off your merchant cash advance in full. This ends your relationship with the MCA company and gives you a more standard loan agreement.When refinancing, be sure to borrow only what is needed to pay your payoff amount, closing costs, and any new working capital. Avoid racking up unnecessary debt. Shop around with multiple lenders to find the best possible rates and repayment terms.Explore Legal OptionsIn some cases, MCA companies engage in predatory tactics such as excessively high interest rates or unreasonable default charges. If you believe your agreement is fundamentally unfair or deceptive, consider consulting with an attorney.Depending on the specifics of your case, they may recommend legal action to invalidate the contract. For example, some MCA agreements have been successfully challenged as disguised loans exceeding state usury caps.An attorney can assess your situation and help determine if you have grounds to pursue legal remedies. This route does involve time and expense but may be worthwhile to escape an abusive agreement.Key TakeawaysRenegotiating an MCA is possible when payments become overly burdensome. Approach the conversation cooperatively and focus on finding an arrangement that works for both parties. Get any new terms in writing before agreeing.If the MCA provider refuses reasonable requests or includes abusive clauses, consult with legal counsel. In some cases, the agreement may be successfully challenged in court.With persistence and the right strategy, you can potentially reach an improved agreement that meets your business needs. Don’t hesitate to ask for better terms or explore alternatives if your current MCA is causing financial distress.
