12 Sep 23

Merchant Cash Advance Attorney Washington

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Last Updated on: 14th September 2023, 11:26 pm

Merchant Cash Advance Attorney Washington

Merchant cash advances have become a popular alternative to traditional small business loans in recent years. A merchant cash advance provides a business with an upfront sum of money in exchange for a percentage of future credit card sales. This can be an attractive option for businesses that need quick funding and may not qualify for a bank loan.
However, merchant cash advances also come with some major drawbacks that business owners should understand before signing an agreement. The costs and terms of merchant cash advances can be predatory, trapping business owners in debt cycles they can’t escape. That’s where working with an experienced merchant cash advance attorney in Washington can help.

How Merchant Cash Advances Work

A merchant cash advance provides funding upfront in exchange for a fixed percentage of future credit card sales over a set period of time1. The amount due each day or week is taken automatically as a percentage of credit card sales.
For example, a flower shop might get an advance of $10,000 and agree to pay back $300 per day until $15,000 is repaid. The term is usually 4-10 months. There are no fixed payments; the amount due fluctuates based on credit card sales.
This type of financing appeals to businesses because:

  • Funding can be obtained quickly, sometimes in as little as 24 hours
  • There are fewer eligibility requirements than bank loans
  • Payments adjust up and down with sales

However, the costs and risks are much higher compared to traditional loans.

High Costs and Risks

While merchant cash advances seem easy to obtain, the costs are extremely high. Advances typically have an annual percentage rate between 60-200%2.

This is much higher than even credit cards or online lenders.
Other risks include:

  • Daily payments are taken regardless of actual sales, which can quickly drain a business’s accounts
  • It’s easy to get trapped in debt cycles, taking new advances to pay off old ones
  • Advances have vague terms that let providers change payments and seize assets if they aren’t satisfied
  • Providers have first priority access to credit card sales ahead of other expenses

Unfortunately, many business owners don’t realize how dangerous merchant cash advance agreements can be until it’s too late. That’s why it’s critical to have an experienced attorney review any proposed agreement first.

How a Merchant Cash Advance Attorney Can Help

A merchant cash advance attorney understands the legal side of these complex financial products. They can help business owners in several important ways:

  • Review the full agreement and explain all terms, costs, conditions and risks in plain language
  • Negotiate more favorable terms like lower payments or longer repayment periods
  • Add protective provisions to the agreement
  • Develop strategies to limit personal liability if the business defaults
  • Dispute predatory lending practices
  • Defend against collection lawsuits and asset seizures

Having an attorney involved before signing an agreement can potentially save a business owner thousands of dollars and prevent devastating lawsuits down the road.

Important Legal Protections

There are also some important federal and Washington state laws that provide protections around merchant cash advances:

  • The federal Truth in Lending Act requires disclosures of APR and total costs [3]
  • In Washington, the Collection Agency Act regulates what collection tactics lenders can use to recoup debts [4]
  • The Washington Consumer Loan Act has protections against predatory lending and caps interest rates on certain loans [5]

A merchant cash advance attorney will know how to leverage these protections for the business owner’s benefit.

Beware of Scams

Unfortunately, the merchant cash advance industry is also ripe with scams and predatory schemes. Many so-called lenders are not actually registered businesses. They lure in business owners with promises of fast money, then disappear with the upfront fees and leave the applicant with nothing 6.
Warning signs of a scam include:

  • Requests for upfront fees before funding is provided
  • Refusal to provide documentation or company information
  • High-pressure sales tactics
  • Too-good-to-be-true offers of approval
  • Lack of transparency around rates, terms and costs

Reputable merchant cash advance providers should be transparent, registered businesses willing to fully explain their products. Having an attorney vet any agreement is the best way for a business owner to avoid scams.

Alternatives to Consider First

Because of the high costs, it’s smart for business owners to consider alternatives before turning to a merchant cash advance. Some options include:

    • Business credit cards with intro 0% APR offers
    • SBA loans that offer reasonable long-term financing