Seattle Merchant Cash Advance Attorney

Seattle Merchant Cash Advance Attorney

Merchant cash advances can be a great way for small businesses to get quick access to capital when they need it. But these loans also come with some big risks that business owners need to understand before signing on the dotted line. In this article, we’ll break down everything you need to know about merchant cash advances in Seattle – how they work, the pros and cons, and what to do if you get into trouble with repayment.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of business financing where a company gets an upfront sum of money in exchange for a percentage of its future credit card sales. This is different from a traditional small business loan because the MCA provider doesn’t look at your business’s credit score or financial history. Instead, they assess how much money flows through your credit card processor each month to determine if you qualify and how much they’ll lend.

Here’s a quick rundown of how merchant cash advances work:

  • You apply for a merchant cash advance with an MCA provider.
  • The provider reviews your last 3-6 months of credit card sales.
  • They offer you a lump sum of money upfront, often between $5,000-$500,000.
  • In exchange, they take a percentage of your future credit card sales – usually 8-15% – until the balance is repaid.
  • Repayments are taken automatically from your credit card processor daily or weekly.
  • There’s usually no fixed repayment schedule – the balance goes down as a percentage of your sales.

The appeal for business owners is that you get quick access to capital without having to qualify based on your personal credit. The risk is that if your sales drop, your repayment amounts stay the same, so it takes longer to pay back the advance.

Pros and Cons of Merchant Cash Advances

Merchant cash advances offer some advantages, but also have some big downsides to be aware of. Here are the main pros and cons:


  • Quick access to capital – You can get funded in as little as a few days
  • No collateral required – Your credit score and assets aren’t considered
  • Predictable daily/weekly payments – Repayment amounts vary with sales volume
  • All credit types accepted – Even businesses with bad credit can qualify


  • Very high interest rates – The equivalent APR is usually over 50%
  • Payments don’t decrease if sales drop – This can lead to a debt spiral
  • Difficult to pay off early – Prepayment penalties apply in most cases
  • Daily/weekly payments – More frequent than a traditional loan
  • Potentially decreases cash flow – MCA payments are taken first by the processor

As you can see, the biggest downside to merchant cash advances is the high cost. Make sure you run the numbers and calculate the equivalent interest rate before signing anything.

Common MCA Industry Abuses

While they can be helpful for some businesses if used carefully, merchant cash advances have developed a bad reputation due to predatory lending practices by some providers. Here are some of the most common industry abuses to watch out for:

  • Deceptive marketing – Some MCA companies market their products as “loans” when they are really a form of financing.
  • Non-cancellable security agreements – Many providers don’t allow you to cancel the agreement if you pay off the advance early.
  • Double-dipping – Some providers take the repayment percentage from gross sales vs. net sales.
  • Confusing repayment terms – Agreements are often complex and lack transparency about rates/fees.
  • Aggressive collections – There are reports of harassing collection tactics, like accessing business accounts without notice.

These kinds of predatory practices have led to increased legal and regulatory scrutiny of the MCA industry. The FTC recently took action against two prominent providers for deceiving small businesses. And New York imposed new requirements for disclosures and capping rates.

What to Do if You’re Struggling with MCA Payments

If you took out a merchant cash advance and are now struggling to keep up with the payments, there are a few options to consider:

Ask for better terms

Contact your MCA provider and explain that you’re struggling to make the payments due to COVID-19 or other circumstances. They may be willing to reduce the repayment percentage or defer payments for a few months. Get any modified agreement in writing.

Restructure the agreement

You may be able to restructure your merchant cash advance agreement by extending the repayment term. This reduces your near-term payments. But it also means you’ll pay more interest over the life of the loan.

Refinance with another provider

Some businesses refinance their merchant cash advance balance with another provider to get better terms. Just make sure you read the agreement closely and avoid predatory lenders.

Settle for less than you owe

If refinancing isn’t an option, you may be able to settle your MCA debt by paying a lump sum that’s less than the full balance. Many providers are willing to settle for 70-80% of what’s owed. Get any settlement offer in writing before paying.

File for bankruptcy

As a last resort, you can discharge merchant cash advance debt by filing for Chapter 7 or Chapter 11 bankruptcy. This negatively impacts your business’s credit but eliminates the repayment obligation. Talk to a qualified bankruptcy attorney before making this decision.

Finding the Right Seattle MCA Attorney

If you decide to take legal action against your merchant cash advance provider, it’s important to have an experienced attorney on your side. Here are some tips for finding the right legal help in Seattle:

  • Look for a lawyer who specializes in commercial litigation and financial services law.
  • Find someone experienced in MCA cases – this is a niche area.
  • Ask about their track record getting settlements or judgments against providers.
  • Avoid any attorney who guarantees results or pressures you to file bankruptcy.
  • Get fee information upfront – many lawyers work on a contingency basis.
  • Research reviews and complaints with the WA State Bar Association.

The Grant Phillips law firm and Kenneth Dramer’s office have extensive experience representing Seattle business owners in MCA cases. They can help you understand your rights and options.

Potential Legal Claims Against MCA Companies

There are several legal avenues to pursue monetary damages or contract changes against predatory merchant cash advance providers, including:

Deceptive business practices

If an MCA company used deception or false statements to market their product, this may violate state consumer protection laws. You can sue to void the contract and recover any payments.

Unfair contract terms

Courts may deem one-sided provisions like high prepayment penalties or perpetual security interests unenforceable. This can lead to contract changes.

Usury law violations

Setting interest rates above state maximums can potentially nullify an agreement. But usury doesn’t apply to MCA contracts in all states.

RICO claims

Allegations of racketeering against MCA providers have succeeded in some cases. But RICO has a high legal bar.

An attorney can assess your specific situation and determine if you have grounds for any of these claims against your provider. Having an experienced lawyer greatly improves your chances of a favorable settlement or court ruling.

Recent Legal Cases Targeting the MCA Industry

There have been several notable lawsuits and judgments against merchant cash advance companies recently that may impact providers operating in Seattle:

  • In New York, Par Funding had a $492 million judgment issued against them for deceptive practices.
  • The FTC halted the operations of two Florida MCA companies accused of misleading marketing.
  • A class action suit led to a $4 million settlement from a provider accused of charging rates above California’s usury caps.
  • New York imposed new rules capping MCA rates at 25% for providers in the state.

These cases signal greater scrutiny of the MCA industry. Seattle business owners struggling with predatory lending should explore their legal options. With the right attorney, you may be able to void your contract, recover damages, or get the terms modified.

Should You File an MCA Lawsuit?

Here are some key questions to consider when deciding if litigation against your merchant cash advance provider makes sense:

  • Do you have written evidence of deception or fraud when you signed up?
  • Can you prove the rates/fees exceeded your state’s limits?
  • Are the contract terms clearly one-sided or abusive?
  • Is the provider refusing to negotiate a settlement in good faith?
  • Are your damages large enough to justify the time and legal costs?

Filing a lawsuit takes significant time and money, so the potential reward needs to outweigh the risks. Talk to an attorney experienced in MCA cases to get an honest assessment. In many cases, negotiation and settlements are faster and cheaper than going to court.

What to Expect from an MCA Lawsuit

If you do decide to sue your merchant cash advance provider, here’s an overview of what to expect:

  • Demand letter – Your lawyer will first send a demand letter asking for a settlement.
  • Filing the complaint – If no settlement is reached, your attorney files a lawsuit in state or federal court.
  • Discovery – Both sides exchange documents and conduct depositions to build their cases.
  • Motions and hearings – Your lawyer will file motions asking the court to take action.
  • Settlement negotiations – The judge may order mediation to try to reach a settlement.
  • Trial – If no settlement, the court hears arguments and issues a verdict.
  • Judgment/damages – If you win, the court orders the provider to pay damages or void the contract.

Lawsuits are unpredictable – you may settle early, or it could take over a year to reach a resolution. Having an experienced attorney is crucial. They’ll represent your best interests every step of the way.