Renegotiating the Terms of Your Merchant Cash Advance Agreement
A merchant cash advance (MCA) can provide quick access to working capital for a business. However, the terms of MCA agreements are often unfavorable for the business owner. As a result, many business owners look to renegotiate the terms of their MCA after signing the original agreement.
Is Renegotiation Possible?
The short answer is yes – it is possible to renegotiate an MCA agreement. However, success will depend on:
- The specific terms in your agreement
- Your leverage and negotiating position
- The funder’s flexibility
So while renegotiation is possible, it is not guaranteed. You need to review your agreement carefully and negotiate from a position of strength to have the best chance of getting improved terms.
Common MCA Terms to Target for Renegotiation
If you decide to try renegotiating your MCA, these are some of the key terms to focus on:
Daily Payment Amount
This is the fixed daily payment deducted from your merchant account. Reducing this daily payment can significantly improve cash flow.
Payback Multiple
This specifies the amount of money the funder expects to collect in exchange for the amount they advanced to you. For example, a 1.5x multiple means the funder expects $1.50 for every $1 they provided. Pushing for a lower multiple reduces your total repayment burden.
Personal Guarantee
Many MCA agreements require a personal guarantee from the business owner. See if this can be removed so your personal assets are not at risk if the business struggles.
When Is Renegotiation Realistic?
You generally have the most leverage to renegotiate MCA terms when:
- You have made consistent payments – This builds goodwill and shows you are committed to repayment.
- Your business has grown – Improved finances strengthen your position.
- You can offer incentives, like faster payoff – Offering to pay more per day or pay off the balance quicker can motivate the funder.
- You need only small changes – Asking to tweak one or two terms is more realistic than wanting to rewrite the entire contract.
Strategies for Successful MCA Renegotiation
If you want the best shot at getting an MCA agreement amended in your favor, keep these guidelines in mind:
1. Review the Agreement Thoroughly
Carefully comb through the fine print of your original MCA contract. Make sure you understand all the terms and identify areas that are unfavorable or ambiguous. Knowing the agreement inside and out will help immensely during negotiation.
2. Open Communication Early
Do not wait until you miss payments or default to start communication. Ideally, open up a conversation about potentially amending terms shortly after signing the original agreement while things are still positive.
3. Make Your Case Professionally
Clearly explain the specific changes you are seeking and why they make sense for both parties. Provide updated financial documentation to reinforce your position. Avoid emotional appeals or attacks – stay constructive and professional.
4. Be Flexible on Terms
While you may have specific goals, remain open to alternate suggestions from the funder. If you show willingness to compromise, they will likely extend the same courtesy.
5. Consider Incentives
Think creatively about what you can offer to entice the funder. As mentioned earlier, providing incentives like paying off the balance quicker can motivate them to improve terms.
6. Don’t Make Threats
Never threaten consequences or legal action if requests are not met. This will only sour negotiations quickly.
Alternatives If Renegotiation Fails
While renegotiation success is possible, nothing is guaranteed. Be prepared with backup plans in case you cannot get the MCA terms amended, such as:
- Seeking funding elsewhere to pay off the MCA early
- Consulting an attorney about the enforceability of specific MCA terms
- Assessing if bankruptcy filing may be necessary to reset finances
The key is avoiding letting an unfavorable MCA drag down your business indefinitely. Pursue all options to improve the situation.
Getting Legal Help to Renegotiate Your MCA
Trying to rework an MCA agreement on your own can be extremely difficult. Speaking with an attorney experienced in MCA funding can be invaluable.At Delancey Street, our legal team has successfully helped many business owners amend or even void predatory MCA agreements. We offer free consultations to review your situation and provide expert guidance tailored to your specific needs.Our goal is always protecting our clients’ interests so you can move forward with the financing necessary to grow your business on favorable terms. We have relationships with alternative funders we can recommend when MCA terms are unable to be amended.Do not hesitate to contact us or call 212-210-1851 to discuss how we can assist with renegotiating your MCA agreement. The sooner we can review your case, the faster we can help relieve the burden of an unfavorable contract.
