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Kentucky Merchant Cash Advance Attorney

Kentucky Merchant Cash Advance Attorney

Merchant cash advances have become a popular alternative to traditional business loans for many small businesses in Kentucky. Unlike regular bank loans, merchant cash advances provide quick access to capital by purchasing a portion of a business’s future credit card receivables. While this flexibility can be beneficial, merchant cash advances also come with some significant legal risks that business owners should understand before signing an agreement.

How Merchant Cash Advances Work

With a merchant cash advance, a financing company provides a business with a lump sum of capital upfront. In exchange, the business agrees to repay the advance through daily payments taken as a percentage of its credit card and debit card sales.For example, a business might receive a $50,000 merchant cash advance with an agreement to repay $75,000. The lender would then collect 15% of the business’s daily credit card receipts via automatic withdrawals until the full $75,000 is repaid. This usually takes 4-12 months depending on sales volumes.Unlike a term loan, there is no fixed repayment schedule or payment amounts. Repayment fluctuates based on the business’s daily merchant account activity. This flexibility can be helpful for businesses with irregular cash flows. However, it also means the total repayment costs can vary widely.

Common Legal Issues with Merchant Cash Advances

While merchant cash advances provide fast access to working capital, they also come with some significant downsides that business owners should keep in mind:

• High interest rates – Some merchant cash advance companies charge effective interest rates over 100%, which may violate state usury laws.
• Lack of transparency – Agreements often don’t clearly disclose the total repayment amount, annualized rates, or repayment terms.
• Aggressive collections – Companies can freeze merchant accounts or sue if payments fall behind, sometimes putting businesses out of operation.

These issues have led many businesses into financial distress. Several states have started implementing stricter regulations around merchant cash advance practices as a result.

Working with a Kentucky Merchant Cash Advance Attorney

If you have concerns about the terms of your merchant cash advance or are struggling to make payments, contacting an experienced Kentucky merchant cash advance attorney can help protect your rights. Here are some key ways a knowledgeable lawyer can assist:

• Reviewing the agreement – Identifying prohibited terms, interest rates above legal limits, insufficient disclosures, or other violations.
• Negotiating with the lender – Helping negotiate a settlement, payment plan, or contract changes if violations are found.
• Defending against lawsuits – Asserting defenses and counterclaims if legal action is taken over missed payments.
• Filing bankruptcy – Advising if bankruptcy is an option to eliminate part or all of the debt.
• Recovering damages – Suing for damages if unlawful lending practices can be proven.

Kentucky Laws and Regulations

There are currently no laws in Kentucky that specifically regulate merchant cash advances. However, some important laws and licensing requirements may still apply:

• Usury laws – The state has a general usury law capping interest rates at 8% unless exempted. Merchant cash advances may qualify for exemptions but it is debated.
• Consumer protection laws – Prohibit unfair, deceptive, or fraudulent business practices. May provide grounds to challenge predatory merchant cash advance terms.
• Lending license – Companies making loans in Kentucky may require a lending license from the state’s Department of Financial Institutions. Unlicensed lending can be penalized.

Potential Violations to Watch For

Some common merchant cash advance practices that could potentially be legally challenged in Kentucky include:

• Effective APR over 60%
• Failing to register as a lender with the state
• Requiring personal guarantees or confessions of judgement
• Misrepresenting or obscuring fees, rates, or repayment terms
• Freezing merchant accounts without notice
• Making unlawful threats or false statements during collections

Finding a Qualified Kentucky MCA Attorney

If considering legal action related to a merchant cash advance, it’s important to choose an attorney experienced with these types of cases. Here are some tips for finding a qualified Kentucky MCA lawyer:

• Search for attorneys specializing in commercial litigation and financial services law.
• Look for lawyers with specific experience handling MCA cases.
• Check state bar records to verify licensure and disciplinary history.
• Schedule a consultation to discuss your agreement terms and concerns.
• Ask about their experience negotiating MCA settlements.
• Understand fee arrangements and payment options before retaining.

Having an experienced merchant cash advance attorney review your agreement and represent your interests can help ensure your rights are protected under Kentucky laws. Don’t hesitate to seek legal assistance if you have concerns or are struggling to repay your merchant cash advance.