Know Your Rights: Merchant Cash Advance

By Robert Jacovetti

Many small businesses turn to merchant cash advances (MCAs) to help their businesses push through tough times. A merchant cash advance is an “advance” on future revenue, but it’s unlike a typical loan. An MCA gives businesses an upfront sum of cash in exchange for a slice of future credit and debit card sales. Since merchant cash advances aren’t like typical loans, you should know how to protect your rights.

If you have questions about dealing with merchant cash advance issues, contact Jacovetti Law, P.C. today at (516) 217-4488 to schedule a case review!

Merchant Cash Advance: Too Good to Be True?

Small businesses looking for quick business loans with minimal hassle will think that a merchant cash advance is exactly what they need. Most merchant cash advance applications are online, and businesses can receive same-day business funding with little documentation required.

However, it sounds too good to be true.

Signing up for a merchant cash advance may seem like a great option to help your business overcome financial struggles, but in reality, an MCA may force your business down a steep rabbit hole. And when merchant cash advance problems arise – companies want to know more about how MCA regulations can protect their rights.

Merchant Cash Advance Regulations

Believe it or not, merchant cash advances don’t have strict regulations. A merchant cash advance might seem like a traditional loan, but merchant cash advance companies give you an advance to purchase your future credit sales. It means that a merchant cash advance isn’t a loan; it is a sale.

Since MCAs aren’t loans, they aren’t subject to the same federal regulations as lenders and creditors. For such reasons, MCAs can charge much higher interest rates than other small business lenders—confusing borrowers to distinguish the true costs of the advance.

Future Merchant Cash Advance Regulations

Although MCA companies are starting to experience scrutiny, it is unlikely that merchant cash advance companies will see major regulations in the near future. As long as merchant cash advances are still purchases or receivables (and not a loan), companies will still be able to run their MCA transactions per usual.

Buyers must beware of the impact merchant cash advances can have on their business and the real costs of those transactions.

Confession of Judgment Agreements

Merchant cash advance lenders can encourage borrowers to sign “confessions of judgment” agreements, which may allow the lender to put a restraint on the borrower’s bank account. It can result in the MCA company effectively shutting down the borrower’s business if they have not paid. Confessions of judgment agreements bypass a lender’s duty to prove the elements of their claim and create a serious issue for borrowers.

Can I Sue a Merchant Cash Advance Company?

If you have been affected by a merchant cash advance, you can file a claim against the MCA company. If you are a borrower who has defaulted on your payment and you have signed a confession of judgment agreement, there are limited circumstances that can provide relief. It is important to seek the help of an experienced New York merchant cash advance attorney right away.

New York Merchant Cash Advance Defense Lawyer

If you need legal guidance with your merchant cash advance case, our team at Jacovetti Law, P.C. is here to help you. As your advocate, our New York merchant cash advance attorneys can negotiate to lower your daily MCA repayment while your business is under financial stress. We can analyze your case and help you find the best possible outcome.

Contact our New York merchant cash advance defense lawyer today at (516) 217-4488 to schedule a case consultation!