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Merchant cash advances (MCAs) can seem like an easy way to quickly get funding for your business. However, they can also become difficult to pay back, especially if your business runs into financial trouble. If you find yourself struggling to make the daily or weekly payments on your MCA, you may be wondering if there’s a way out. Here‘s what you need to know about stopping payments on a merchant cash advance.

Understanding Merchant Cash Advances

First, let‘s review what a merchant cash advance is and how it works. An MCA provides a business with a lump sum of cash upfront. In exchange, the business agrees to pay back the advance through a percentage of its future credit card sales over a set period of time.Unlike a small business loan, an MCA does not have a fixed interest rate or payment schedule. The payback amount and timeline fluctuate based on the volume of a business‘s credit card transactions.This flexibility is part of the appeal for many business owners. However, it can also lead to cash flow issues if sales drop unexpectedly. Businesses may find themselves locked into high payment percentages that become unmanageable.

Falling Behind on Payments

If you are falling behind on your merchant cash advance payments, the first step is to contact your MCA provider immediately. Explain your situation and ask about possible options to reduce or defer payments.Most MCA companies would prefer to work with you rather than see your business fail. They may agree to adjust the payment terms, lower the percentage taken from daily credit card sales, or let you skip payments for a certain period.

See also  Arkansas MCA Defense Lawyers Business Debt Relief

Getting Out of an MCA Entirely

However, if your business cannot reasonably afford any ongoing payments, you may need to explore ways to terminate the agreement altogether. Here are a few options to consider:

Refinancing the Advance

One method for getting out of a merchant cash advance is to pay it off by taking out another type of financing with better terms. Possible alternatives include:

  • Bank loans – Taking out a traditional term loan allows you to pay off the MCA at once. This replaces the open-ended agreement with fixed monthly payments over 1-5 years on average.
  • SBA loans – Small Business Administration loans offer long repayment periods (up to 10 years) and lower interest rates. This can significantly reduce the monthly burden compared to an MCA.
  • Asset-based loans – These loans use assets like property, inventory, or equipment as collateral. They provide funds to pay off the MCA while allowing 5-7 years to repay.
  • Alternative lenders – Online/non-bank lenders provide faster options than banks with more flexibility than MCAs. Interest rates are higher but may still provide relief.

Before pursuing refinancing, carefully compare interest rates, fees, collateral requirements, and loan terms across all available options for your business.

Increasing Sales Volume

If refinancing is not possible, focus on driving up your sales volume to get the MCA paid off faster. This may involve:

  • Raising prices – Consider moderate price increases to improve profit margins on existing products/services.
  • Adding products/services – Introduce new offerings to attract more customers and transactions.
  • Cutting costs – Reduce overhead and unnecessary expenses to keep more revenue.
  • Marketing push – Invest in targeted ads and promotions to bring in more sales.

With higher sales volume, more money flows back to the MCA provider. This method requires patience and financial discipline but allows you to pay off the advance without taking on additional debt.

See also  Arlington MCA Defense Lawyers Business Debt Relief

Debt Settlement

If increasing sales is not viable or the MCA balance remains unmanageable, debt settlement may be an option. This involves negotiating directly with the MCA provider to settle your outstanding balance for less than the full amount owed.The settlement terms will vary based on factors like:

  • Your current percentage rate and remaining term
  • Total amount still owed
  • Your business’s financial hardship
  • Willingness to negotiate on provider’s side

Most MCA companies will initially push back on settlement talksHaving an experienced business debt attorney on your side levels the playing field and makes striking a deal more likely. They understand all the intricacies of MCA contracts and use proven strategies to secure relief.

The Debt Settlement Process

If you move forward with debt settlement for your merchant cash advance, the process typically involves:

  1. Reviewing finances – Analyzing the full scope of business debts and assets to determine the maximum settlement amount you can afford.
  2. Halting payments – Temporarily stopping payments gives you leverage in talks and conveys hardship. But this also triggers more aggressive collections.
  3. Negotiating settlement – Your attorney handles all talks, starting with low offers and compromising up to your ideal number. Be prepared for a lot of back and forth.
  4. Reaching agreement – Once the MCA provider agrees to a discounted lump-sum payment to release you from the contract, the deal is formalized in a written settlement agreement.
  5. Making payment – You pay the settled amount on the agreed timeline. The MCA contract is then canceled and you are released from further liability.

What Happens If I Just Stop Paying?

You always have the nuclear option of unilaterally cutting off payments on your merchant cash advance without any plan or approval. **But this is an extremely risky move that is not recommended.**Here is what you can expect if you stop paying an MCA provider without settling the debt:

  • Aggressive collections – The provider will deploy every tactic possible to force you to pay – calls, letters, lawsuits, sending collectors to your business, etc.
  • Harm to credit – Not paying as agreed damages your business credit rating and personal score if you signed a guarantee. This limits future financing options.
  • Potential bankruptcy – If collections efforts fail, the provider can force you into bankruptcy to attempt to recoup some of what they are owed.
  • Business instability – The constant distractions and stress from collections harassment can undermine operations and jeopardize relationships with customers, employees, and partners.
See also  Alabama MCA Defense Lawyers Business Debt Relief

Unless you are prepared to close up shop permanently, stopping MCA payments outright often creates bigger long-term headaches than the debt itself.

Consult an Attorney Before Deciding

Trying to navigate your way out of a merchant cash advance without professional legal and financial advice is extremely precarious. Before stopping payments or taking any other drastic actions: Schedule a free consultation with a business debt relief attorney. They will review your full situation, clearly explain all options available, and recommend the best path forward.An experienced attorney can guide you each step of the way in dealing with an unaffordable MCA. They serve as your advocate to negotiate fair settlements with providers and defend against aggressive collections tactics.They also provide impartial advice on whether stopping payments on your merchant cash advance makes strategic sense or poses unwarranted risks to your business.



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