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Do you have a merchant cash advance you are struggling to pay? Did you receive a merchant cash advance breach of contract lawsuit? Are you having merchant cash advance legal issues? If you’ve received notice from your lender, you may be asking yourself what a merchant cash advance lawsuit is and what it entails?
Small business owners occasionally require additional operating capital to effectively run their businesses. You ent, additional inventory or maybe you just need to cover payroll. If a business owner does not qualify for traditional financing, a Merchant Cash Advance Loan may seem like a reasonable or viable option to help the business.
However, what may have been characterized by the lender as a factoring relationship was, in fact, an unregulated loan. The payments and interest may become too high for you to handle on your own.
The money may come quickly, but what small business owners do not realize is that they may be setting themselves up for potential bankruptcy. If you’ve taken an advance from a merchant cash advance lender and are now struggling to address your situation, you need an experienced merchant cash installmentloansgroup.com/payday-loans-ak/ advance attorney on your side.
How Do MCAs Work?
In a typical merchant cash advance, lenders and borrowers agree to a daily or weekly payback system and in return, the lender receives a percentage of sales or receipts from the borrowers.
You would assume that if your business is slow, the daily and weekly payments would reflect the revenue of the business. Unfortunately, this is not how the system works. Most lenders have a fixed amount that they recover from businesses whether the business is thriving or not.
As part of the process, a lender will generally require a person to provide businesses merchant processing statements and bank statements to determine how much of an advance he or she will qualify for. Additionally, a credit check may be required in order to qualify.
If approved, the lender will also provide the terms and conditions. The funds are then deposited into the business owner’s bank account for their use. The payments can then be paid back in a specified time frame.
Often, business owners may get in over their heads with these types of loans and may require the assistance of a Merchant Cash Advance experienced lawyer to help them in regaining day to day control of their business enterprise.
MCA lenders are quick to bring lawsuits against borrowers who default on payments, so it is important to seek legal counsel immediately if you have defaulted or believe you will default on a payment.
What is the Difference Between an MCA and a Loan?
A merchant cash advance (MCA) isn’t technically a loan, but rather a cash advance based upon the future credit card receivables a business will receive. The process to receive the advance is a fairly quick process and it is not a credit driven approval. Merchant cash advance companies look at the daily credit card receipts to determine if the business is capable of paying back the funds in a timely manner.
Merchants sign an agreement that outlines the advance amount, payback amount, holdback and the term of the advance. Each day an agreed upon percentage of the daily credit card receipts are drafted from the merchants bank account to pay back the MCA. This is called a “holdback” and it will continue until the advance is paid in full.