FREQUENTLY ASKED QUESTIONS

We represent small business owners from all over the country. Some for example are truckers, contractors, roofers, doctors, restaurants, gym owners, retailers, manufacturers and professionals. There is no “typical” client, since debt and high interest loans can effect any business and merchant owner.

Yes, our law firm settles Merchant Cash Advance Loans with all Lenders including: Yellowstone, Everest (Ebf), Funding Circle, Can Capital, Kabbage, On Deck Financing, Lendini, Snap, Platinum, EIN Cap, Mantis, Pearl Beta, Green Capital, Capital Advanced Services, GTR Source, American Express, PayPal, Knight, Itria, 1st Global Systems, Bitty, Swift, Lendr, Wellen, Gibraltar, SRS, SPG Advance, Second Chance Funding, Forward Financing, National Capital, Landmark, Richmond, Alpha, Accel, ACH, Ace, Regal, Bluevine, One Park, Fundbox, Lending Club, Credibility, Lendio, Quarterspot, Fundation, Balboa, Credibly, Payability, National Funding, ML Factors, New Logic, Accord, Americas, BFS , CFG, Elevate, Fora, Fox, Fundworks, Fundzio, In Advance, GRP, Infinity, Jet, Kalamata, Lendfi, Max Advance, MFS Global, Merchant Cash Group, NextWave, Pledgecap and more!

There is currently no law that limits how much interest a merchant cash advance company can charge. Since merchant cash advances are not considered loans in the traditional legal sense, but rather a purchase of future credit card receivable revenues, legally they are considered purchases and thus there is no regulation associated with them, both on a State and Federal level. This means Merchant Cash Advance Funders don’t need to follow state usury laws, which are set by each State to limit how much interest companies can charge on traditional loans or credit cards, making this industry ripe for abuses and like the wild west. The one type of regulation these companies fall under is the Uniform Commercial Code “UCC.” However, this code was written to keep business transactions uniform, but it does not regulate interest rates or cap interest rates in anyway.

Merchant Cash Advance funders charge excessively high fees that can be calculated as an interest rate. While most State Laws prevent the charging of interest in excess of 25% to 30%, a Merchant Cash Advance is well in excess of this. In fact, we have encountered funders that charge in excess of 500%! How can this be legal? Unfortunately, current State Usury Laws do not apply to Merchant Cash Lenders. They are not subject to state usury caps, arguing that the transaction with the borrowing merchant is not a loan, but rather a “cash advance against future revenues.” More specifically, the funders claim they are merely buying future credit card receivables from the small business owner. Why does this matter? There is a very small but significant difference between a purchase of future credit card revenues and a so called loan. Only a loan is subject to usuary laws. Thus, a Merchant Cash Advance interest rate is usually legal.

WHAT IS BUSINESS DEBT SETTLEMENT?

Business Debt Settlement is the act of converting a business debt or business loan into a permanent settlement. Settlement can take many forms, such as lowering principal or stretching the time line to repay the loan. Business Debt Settlement is often handled by a Business Debt Settlement Attorney. This is a lawyer who understands contracts and business as well as lending laws and understands predatory lending products such as a Merchant Cash Advance. A business debt settlement will incorporate the terms of repayment in an official legal agreement called a Stipulation of Settlement. This document will be drafted by your business debt lawyer and contains clauses to protect you while you are engaged in repayment.

WHAT DOES A BUSINESS DEBT SETTLEMENT ATTORNEY DO?

A Business Debt Attorney is a lawyer who understands contracts and business as well as lending laws and understands predatory lending products such as a Merchant Cash Advance. Usually such an attorney is hired to obtain settlement on business debt for example a Merchant Cash Advance. The Business Debt Attorney will likely be working on obtaining a business debt settlement agreement that will incorporate the terms of repayment in an official legal agreement called a Stipulation of Settlement. This document will be drafted by your business debt lawyer and contains clauses to protect you while you are engaged in repayment.

WHAT IS BUSINESS DEBT NEGOTIATION?

Business Debt Negotiation is the act of a party or lawyer negotiating with a creditor or lender in order to settle the debt for a lower payment and or for better repayment terms. Business Debt Negotiation is often handled by a Business Debt Settlement Attorney. This is a lawyer who understands contracts and business as well as lending laws and understands predatory lending products such as a Merchant Cash Advance.

A business debt settlement will incorporate the terms of repayment in an official legal agreement called a Stipulation of Settlement. This document will be drafted by your business debt lawyer and contains clauses to protect you while you are engaged in repayment. Business debt can take many forms such as a business credit card, a line of credit or a Merchant Cash Advance. The sale of future receivables i.e., an MCA is another form of business debt because the Merchant borrower is required to pay back the lumpsum of money it received from the MCA funder for its future receivables.

DO I NEED A DEBT SETTLEMENT ATTORNEY TO SETTLE BUSINESS DEBT LEGALLY?

While you do not need an attorney to negotiate or settle your debt, a business cannot represent itself in a Court or legal proceeding. When there is a legal action connected to the business debt, the debt settlement attorney will endeavor to speak and negotiate with your creditors over your business debt and obtaining terms and amounts that are affordable to repay. A business cannot under the law represent itself in a lawsuit or if a UCC lien is filed. At this point the business is required to hire official Counsel. Many debtors take their business debt to debt settlement companies. These are companies not law firms and without lawyers. This is a dangerous solution because if the creditor or MCA lender files a lawsuit or takes official legal action for a default or breach of a Merchant Cash Advance agreement.

WHAT IS A QUICK BUSINESS LOAN?

All businesses require working capital to expand and grow and sometimes for unexpected changes to the business. A quick business loan is a means by which a company applies for a business loan that is originated in 24 hours or less. Most often these types of quick business cash loans come in the form of a Merchant Cash Advance. A Merchant Cash Advance is the sale and purchase of future receivables. The law holds that a purchase and sale agreement cannot be a loan.

If there is no loan, there cannot be usury. Also, quick cash loans for businesses are offered by private equity or private capital and comes in the form most often than not in the form of Merchant Cash Advance funders. An MCA can seem like a good idea, but with massive daily or weekly payments and for a short term, makes a quick business loan is a very burdensome loan and can lead to very negative consequences.

WHAT DOES IT MEAN IF YOU STUCK IN A MERCHANT CASH ADVANCE?

Being stuck in an MCA means that a business owner who originated a Merchant Cash Advance but can no longer afford the repayments and arbitrary terms of the short-term MCA. Once a merchant is unable to make repayments, they are considered stuck and often will seek additional MCAs in order to try pay off the previous MCA.

This cycle is one that usually never ends and before the merchant borrower can get back on their feet, they are stuck with high interest, high fees, short term and burdensome MCA loans. It is very common at the time a merchant is stuck in an MCA that is crushing the business cash flow and there is no one from the lender willing to lend an ear and provide some relief from the burdens of originating Merchant Cash Advances.

MERCHANT CASH ADVANCE LAWYER

A Merchant Cash Advance Lawyer is an attorney who understands contracts and business as well as lending laws and understands predatory lending products such as a Merchant Cash Advance. Usually such an attorney is hired to obtain settlement on business debt for example a Merchant Cash Advance. The Merchant Cash Advance Lawyer will likely be working on obtaining a business debt settlement agreement that will incorporate the terms of repayment in an official legal agreement called a Stipulation of Settlement. This document will be drafted by your Merchant Cash Advance lawyer.

Always be sure to go to a Merchant Cash Advance Lawyer when seeking relief from a Merchant Cash Advance. With an MCA lawyer, you will be getting an expert in Merchant Cash Advance law and who understands MCA Agreements and has relationships and experience working with the MCA funders on behalf of the lawyers MCA clients. A Merchant Cash Advance Lawyer will bring certainty to a very uncertain set of circumstances. Grant Phillips Law understands Merchant Cash Advances, MCA law, MCA contracts, liens, UCC’s, frozen bank accounts, mandatory arbitration and additional factors that provide your Merchant Cash Advance Lawyer with the tools to bring Merchant Cash Advance relief.

No two cases are the same. Grant Phillips Law will review your case and your specific facts in detail, in order to come up with a personalized and satisfactory plan of action to improve cash flow and to keep more of your receivables. Our attention is YOU. We are here to assist you in dealing with out-of-control Merchant Cash Advances, this is all we do, 24/7.

WHAT IS A MERCHANT CASH ADVANCE?

A Merchant Cash Advance is the sale and purchase of future receivables. The law holds that a purchase and sale agreement cannot be a loan. If there is no loan, there cannot be usury. Therefore, an MCA Funder may charge what we think of as interest in any amount. Also, any organization that affiliates with an FDIC insured bank is exempt from usury. A Merchant Cash Advance proffers a quick cash loan in return for a portion of your future receivables. A Merchant Cash Advance often comes with exorbitant fees, costs and repayment amounts. Most of the clauses and terms within a Merchant Cash Advance agreement are most often arbitrary and capricious and very burdensome. If the businesses sales slowdown or the business suffers a surprise expense, a merchant may not be able to repay the MCA.

This can bring with it harsh penalties and possible legal action such as a lawsuit. Sometimes a Merchant Cash Advance Funder can take pre-judgement remedial action. An example is freezing your accounts even before bringing a lawsuit or obtaining a judgment. This applies in some States. It is imperative to be proactive no matter how stressful to deal with the MCA debt. Waiting is not an option. Bank accounts can be frozen while you wait and your money as owed to you by your clients could be taken via the filing of a UCC (Uniform Commercial Code) lien, or file a lawsuit.

DOES ANY REGULATION EXIST WHEN DEALING WITH A MERCHANT CASH ADVANCE?

Merchant Cash Advance companies and funders work in a very grey area of the law. There is no uniform law and any legislation governing a Merchant Cash Advance is done State by State. At present there are 10 States that regulate MCA’s in some form or fashion.

However, the laws that exist at present in States such as New York, California or Texas do not go far enough and most often the law is simply to enforce disclosures – i.e., a list of disclosures that an MCA funder must provide to the business seeking to originate the MCA. Since there are no comprehensive laws governing Merchant Cash Advances, merchants and businesses are left vulnerable to predatory lending practices. This is the reason MCA funders are not subject to ordinary lending and banking laws and regulations, meaning the MCA funder commonly charge sky-high fees, use abusive and aggressive collection tactics and engage in other forms of predatory lending. With little legislation that doesn’t go far enough, businesses are at the mercy of the Merchant Cash Advance funder and their collection tactics.

If possible, contact an expert merchant cash advance lawyer before signing a Merchant Cash Advance contract. States like New York and California have some regulation, but the laws governing Merchant Cash Advances or the sale and purchase of future receivables being regulated primarily governs disclosures whereby the MCA Funder must disclose the cost of financing, the Net amount to be received by the business and a list of fees and costs as well as other disclosures. It is designed to prevent predatory lending practices and abusive collection acts placing the business in an impossible situation fiscally. Be sure to avoid excessive MCA fees, sky-high repayment amounts and aggressive collection tactics. The intent of the disclosure laws are to allow a borrowing business to make a fully informed decision when seeking financing and to be able to compare one MCA to another.

WHAT ARE USURY LAWS?

Usury is the charging of interest that exceeds a State enforced interest cap. Usury laws are designed to protect borrowers from egregious and exorbitant interest rates. However, because a bona fide MCA is considered by law to be a purchase and sale of receivables, it cannot be a loan. This nuance means a Merchant Cash Funder can charge interest and fees well north of the usury cap.

Some Courts like those in New York have begun to crack down on this nuance, finding the Merchant Cash Advance is in fact and law a loan, simply in the disguise of an MCA and thus find the alleged MCA is a loan and violates usury laws. To make such a determination is best made by a merchant cash advance attorney who specializes in defending businesses from MCA’s, predatory lending and abusive collection practices.

WHAT TO DO IF YOU CONSIDERING A MERCHANT CASH ADVANCE

If you are deciding on whether to originate a Merchant Cash Advance remember the following:

Do not sign anything before it is reviewed for you by a Merchant Cash Advance Lawyer.

Look out for hidden or “buried” fees. Examples are prepayment penalty clauses.

Look out for fees that don’t define what the fee covers.

Don’t be afraid to ask questions and shop around.

Watch for excessive underwriting and origination fees or percentage of the loan amount.

Know your actual costs – just because an MCA has no real APR (Annual Percentage Rate) one may mistake the cost of financing. The total cost is usually far higher than expected. This is because MCA’s are calculated by the funder using a FACTOR RATE. A factor rate can range between 1.3 to as high as 1.6. If the total repayment amount is not disclosed – don’t sign.

If the MCA Agreement doesn’t include a breakdown clearly depicting a comprehensive list of all fees, do not originate or sign.

Try to obtain conventional financing or a SBA (Small Business Administration).

Watch out for an MCA agreement that contains fees but doesn’t specify exact amounts.

Also, be sure there are no fees or costs that arise during the repayment and that were not disclosed at the time of funding.

Make certain your Merchant Cash Advance does not contain a Confession of Judgment clause. This is a document or clause allowing the MCA funder to obtain a judgment against the business without you having a day in Court to defend yourself. Another type of confession of judgment is an Agreed Judgment. The Agreed Judgment functions exactly like a COJ. Courts especially in New York will look closely at a COJ since they were repealed from law in September of 2019. Be sure not to sign a COJ since you will lose the opportunity to attack the MCA and defend yourself in Court against the MCA Debt.

Confirm your MCA Agreement has a reconciliation clause – this is a clause that requires an MCA funder to change the daily or weekly repayment to an amount more akin to your actual revenue if there are changes to your business. There should be no penalties for a decline in your receivables.

Finally, because you will repay the MCA on a daily or weekly basis, if your sales decline and you are unable to repay you may face legal action such as a lawsuit or the filing of mandatory arbitration or even the filing of UCC liens that freeze bank accounts. Thus, it is imperative that if you do originate an MCA, be sure the amount borrowed is commensurate with your actual revenues and cash flow.