Tennessee MCA Defense Lawyers Provide Business Debt Relief

Our phone number is 212-210-1851.Merchant cash advance (MCA) loans have exploded in popularity over the last decade as a form of alternative business financing. Unlike traditional bank loans, MCAs provide fast access to capital without requiring strong credit or collateral from the business owner.However, MCA loans also come with their downsides. Namely, the costs of MCA financing tend to be much higher compared to other financing options. MCA providers charge very high effective interest rates, often exceeding 100% APR when factoring in various fees.

The Risks of MCA Loans

While MCAs provide easy access to capital, they can also lead business owners into troublesome situations (Reddit). Some of the key risks include:

• High interest costs – Interest rates on MCA loans routinely exceed 50% APR and can be as high as 200% APR when all fees are accounted for. This quickly escalates the total repayment amount to 2-3X the original advance amount.
• Overadvancing – MCA providers focus on maximizing advance sizes rather than carefully evaluating if businesses can support the additional debt burden. It’s easy to become overadvanced.
• Aggressive collections – MCA contracts authorize debilitating collection rights if the business defaults, including accessing bank accounts and garnishing daily credit card receipts. Lawsuits and threats are common tactics.

These issues have spurred increased legal action from business owners against MCA funders. Fortunately, several defenses can help shield small business owners from the most egregious MCA practices.

Legal Defenses Against Predatory MCA Loans

If you feel trapped in an abusive MCA agreement, consult with an experienced commercial litigation attorney as soon as possible. An attorney can review the specific details of your case and advise on the best defenses and strategies (Avvo).Several potential counters may exist:

• Unconscionability – Argue that the MCA agreement is procedurally and substantively unconscionable. Factors like misleading terms, lack of counsel, and excessive costs can show it was an unfair bargain that should not be enforceable.
• Usury violations – Interest rates exceeding state usury caps on commercial loans may provide grounds for legal action. However, MCA lawyers often structure agreements to avoid usury restrictions.
• Deceptive trade practices – If MCA brokers or marketers made false statements or failed to properly disclose fees and terms upfront, argue they violated state consumer protection laws against unfair and deceptive trade practices.

Finding the Right Business Attorney

Defending against MCA lawsuits and collections actions requires an experienced commercial litigation attorney. Key credentials to seek out include:

• MCA-specific experience – Given the complex legal issues surrounding MCA loans, specialized legal experience greatly helps in crafting an effective defense (FindLaw).
• Business law background – You generally want a business law attorney rather than a general civil litigator. Familiarity with commercial contracts and business financing is very useful.
• Trial record – The top MCA lawyers have experience arguing before judges and juries. Their courtroom track record commands greater leverage in settlement negotiations.

Vet any attorney thoroughly before retaining them. Confirm they have the requisite background and skills to handle MCA cases. Also verify they carry professional liability insurance coverage.

Negotiating MCA Debt Relief

Before pursuing formal legal action, some businesses can negotiate debt relief directly with their MCA provider (Quora). This path generally requires:

• Documentation – Gather details on advance amounts, payment history, contract terms, and communication records. These documents help demonstrate unaffordable repayment terms.
• Hardship evidence – Show financial statements and business records that illustrate inability to maintain payments at contracted levels. Cash flow projections are very useful.
• Reasonable offers – Craft a reasonable settlement offer that allows the MCA firm to still recover partial payments while eliminating the most problematic contract terms or fees. Have your attorney review any revised contracts.

If declined, this evidence would later prove valuable in building a legal case against the MCA provider. But first pursuing a compromise directly can potentially extract concessions and save legal expenses.

Finding the Right Solution

Predatory MCA loans sink countless small businesses each year. But legal and financial solutions can help mitigate the damage from these products. With the right commercial litigation attorney advising you, an exit from the MCA trap is possible. Reach out today to discuss your specific situation and options.