Portland Merchant Cash Advance Attorney

Portland Merchant Cash Advance Attorney

Merchant cash advances have become an increasingly popular form of financing for small businesses in Portland and across Oregon. Unlike traditional bank loans, merchant cash advances provide fast access to capital without requiring strong credit or collateral. However, merchant cash advances also come with some major drawbacks that business owners should understand before signing on the dotted line. This article provides an overview of merchant cash advances, examines the pros and cons, and explains when it may make sense to hire a Portland merchant cash advance attorney.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of financing where a company provides a business with an upfront sum of cash in exchange for a percentage of future credit card and/or debit card sales. It is not considered a loan, but rather an advance on future revenue.Here’s how it works:

  • The business applies for financing and the MCA company evaluates their credit card/debit card sales history.
  • If approved, the business receives a lump sum upfront (often $10,000 – $500,000).
  • In exchange, the business agrees to pay back the advance through daily or weekly payments which amount to a fixed percentage of their credit/debit card sales.
  • The payments are automatically withdrawn from the business’s merchant account until the advance is repaid in full, plus fees and interest.

Unlike a term loan, there is no set repayment period. The business makes payments until the full amount is repaid from their credit card receipts.

Pros of Merchant Cash Advances

There are some potential benefits that make merchant cash advances appealing for small businesses:

  • Fast funding – Businesses can get approved for an MCA within days and receive the funds quickly, sometimes as fast as 24-48 hours. This makes it helpful for urgent cash flow needs.
  • Easy qualification – MCA companies generally only evaluate a business’s credit/debit card sales history. They don’t look at personal credit scores or require collateral.
  • Flexible payments – Repayments fluctuate based on sales volume rather than a fixed monthly payment. This can help businesses during seasonal slowdowns.
  • No early repayment penalties – Businesses can repay the advance early with no prepayment penalties.

For businesses that need quick financing and may not qualify for traditional financing, a merchant cash advance can be an attractive option. The easy application process, quick funding, and flexible terms are big selling points for many small business owners.

Cons of Merchant Cash Advances

However, there are also some significant downsides to be aware of:

  • High costs – MCAs are extremely expensive compared to conventional business loans. Factoring in fees and interest, the annual percentage rate (APR) often exceeds 100%.
  • Daily/weekly payments – Having payments automatically withdrawn daily or weekly can strain cash flow, especially for businesses with uneven revenue streams.
  • No payment limits – MCA payments are taken as a percentage of sales, so there’s no limit to how much can be withdrawn if credit card sales are high enough.
  • Confession of judgment clause – Many MCA contracts contain a confession of judgment (COJ) clause. This allows the lender to seize assets if the business defaults without notice or due process.
  • Personal guarantee – Business owners usually have to personally guarantee repayment. The MCA company can go after personal assets if the business defaults.
  • Difficulty getting out of agreement – Once signed, it can be very difficult to get out of a merchant cash advance agreement without repaying the full amount.

While the quick funding is appealing, the high costs and repayment structure often trap small businesses in an endless debt cycle. Business owners should read the fine print carefully to understand the full implications before signing an MCA agreement.

When to Hire a Portland Merchant Cash Advance Attorney

If you have signed a merchant cash advance agreement and are now facing legal issues related to the debt, it may be wise to hire an attorney experienced with MCAs. Here are some common scenarios:

You are facing a lawsuit or judgment

If an MCA company has sued you or obtained a confession of judgment, you need legal representation right away. An attorney can help respond to the lawsuit, try to get the judgment vacated, and protect your legal rights. Acting quickly is critical.

You are struggling to make payments

If you are falling behind on payments or unable to keep up with the recurring withdrawals, speak with an attorney. They may be able to negotiate revised payment terms or a settlement with the MCA company.

You dispute the default or amount owed

Sometimes businesses default due to misunderstandings over payment dates, discrepancies in the amount owed, or other disputes. An attorney can help you contest the default if you believe it was made in error or argue against excessive fees/interest.

You want to close your business

If you need to close up shop for any reason, having an outstanding MCA can complicate matters. An attorney can help deal with the MCA debt so you can dissolve the business cleanly.

You want to improve cash flow

An attorney experienced with MCAs may be able to help restructure your agreement to improve cash flow if the payment schedule is causing financial hardship.

You want to file for bankruptcy

Filing for bankruptcy can discharge MCA debt. An attorney can advise if this is a wise solution and handle the bankruptcy petition process.

4 Key Questions to Ask a Portland Merchant Cash Advance Attorney

If you decide to hire legal counsel, make sure to ask these important questions:**1. Are you experienced handling MCA cases specifically?**Merchant cash advances are very complex financial instruments. You want an attorney well-versed in the nuances of MCA agreements and applicable laws. Ask how many MCA cases they have handled and what the outcomes were.**2. What are your fees and what services are covered?**Get a clear breakdown of legal fees and what they include. Many attorneys provide a free initial consultation. Ensure you understand what services you will receive for the fees quoted.**3. What is your strategy for defending my case?**A reputable attorney should evaluate your situation and explain their planned course of action. Make sure their approach makes sense for your circumstances.**4. What are possible outcomes and my chances of success?**No attorney can guarantee outcomes. However, they should give you an honest assessment of different potential scenarios, risks, and your likelihood of achieving your goals.

4 Top Defenses Against Merchant Cash Advance Lawsuits

If you are facing legal action over an MCA agreement, an attorney has several possible defenses to mount on your behalf:

  • Improper contract terms – Argue the MCA contract contains illegal, deceptive, or confusing provisions. This can potentially invalidate all or part of the agreement.
  • Unconscionability – Claim the contract terms are unfairly one-sided in favor of the MCA company. Courts may refuse to enforce unconscionable contracts.
  • Usury violations – Allege the fees and interest rates are excessively high and violate state laws against usury. This can nullify the obligation to repay.
  • Inaccurate default – Challenge whether you actually missed payments or defaulted if there is evidence to dispute the MCA company’s claims.
  • No personal guarantee – If you didn’t sign a personal guarantee, argue the MCA provider cannot pursue your personal assets.
  • File bankruptcy – Filing for bankruptcy may discharge all or part of the debt and halt collection efforts.

A skilled lawyer will evaluate which defenses give you the strongest case based on your specific contract and situation.