NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 12th September 2023, 09:57 pm
Merchant Cash Advance Attorney Ohio: What Small Businesses Need to Know
What is a Merchant Cash Advance?
So merchant cash advances have gotten big over the last few years as a way for small businesses like mine to get fast cash. The way it works is a company gives you an upfront lump of money, let‘s say $50,000. But in exchange, they take a cut of your credit card sales over time until you pay it back with interest.It’s not technically a loan, but it kinda acts like one in some ways. The pro is you can get the money super quick, usually in a few days. The con is that the interest rates are crazy high – we’re talking like 40-60% APR when it’s all said and done.
The Risks of Merchant Cash Advances in Ohio
Now don‘t get me wrong, sometimes getting fast cash to cover payroll or inventory can be a lifesaver. But merchant cash advances in Ohio can also be risky if you don’t fully understand what you’re getting into. Let me break down some of the potential pitfalls:
- You might end up paying back way more than you borrowed – the payback amounts can vary a lot depending on your sales
- The payments come out every day regardless of your actual sales
- You could be forced to switch credit card processors and pay higher fees
- If your business defaults, your personal assets could be at risk
Yikes! Because of stuff like this, I’d say any Ohio business thinking about one of these cash advances would be smart to talk to a merchant cash advance attorney first. They can look over the contract and help you avoid any sketchy terms.
Ohio Laws Related to Merchant Cash Advances
Now Ohio doesn’t regulate merchant cash advances like payday loans or other consumer lending. But there are some state laws that still apply:
- Usury laws – These limit interest rates to 8% APR for non-bank lenders. But cash advance companies try to get around this by calling it a purchase instead of a loan.
- Ohio lending laws – Require lenders to be licensed and follow certain rules, but often don’t cover merchant cash advances.
- Consumer protection laws – Prohibit deceptive marketing and lending practices.
So while merchant cash advance companies try to avoid lending regulations, a good attorney may be able to challenge shady contracts that violate Ohio consumer laws.
Federal Oversight and Regulations
On the federal side, merchant cash advances don’t have to follow all the same rules as consumer loans either. For example they don’t have to disclose APRs or other rate information.But the Federal Trade Commission and Consumer Financial Protection Bureau do oversee them and can take action against scams or abuse. The CFPB even has a complaint database where businesses can report problems with cash advance companies.
Fighting Back Against Predatory Merchant Cash Advances
If you feel like a merchant cash advance company is being sketchy or predatory, a good business attorney may be able to help you fight back. Some possible defenses include:
- Challenging unfair contract terms
- Claiming violations of lending laws
- Proving fraud or deception
- Getting the contract invalidated completely
The key is finding an attorney experienced specifically in merchant cash advance cases. They’ll know all the laws and loopholes to protect your small business.
Finding the Right Merchant Cash Advance Attorney
So if you do decide to pursue a merchant cash advance, I’d recommend shopping around for an attorney who:
- Has experience dealing with cash advance companies
- Understands all the state and federal laws and regulations
- Will review the full contract before you sign anything
- Can analyze the rates and explain the total costs
- Can help negotiate better terms
The right attorney will make sure you don’t get stuck with an unfair or abusive deal. They can help you use merchant cash advances as a safe financing option rather than a debt trap.
Alternatives to High-Cost Merchant Cash Advances
Another option is avoiding merchant cash advances altogether and finding better financing choices like:
- Bank loans with lower fixed rates
- Business lines of credit with flexible limits
- Invoice factoring to get cash from unpaid invoices
- 401(k) business financing using your own retirement funds
With some guidance from a financing attorney, you can find the right funding mix for your Ohio small biz. Don’t get caught in a merchant cash advance debt trap! Know your options and your rights.