Our Denver Debt Relief Attorneys Are Ready to Help You Get Out of Debt
Your business means everything to you. You’d do whatever it takes to keep it afloat, including a Merchant Cash Advance (MCA) to get access to funds you don’t have at the moment.
A merchant cash advance works like this: a buyer (i.e., a lender) provides the money you need today in exchange for a portion of your accounts receivable. After providing your company with an injection of capital, the Merchant Cash Advance company requires your business to provide it with access to your account receivables, so it can collect on your debt with very high and frequent payments (often paid weekly or even daily).
While this may sound like a good deal to help you get through tough times, it’s not, because the effective interest you are being charged for this capital is absurdly high. The complex fee structures associated with MCAs, which are effectively interest, would break Colorado’s usury laws.
Because of this, the MCA companies structure these transactions as a purchase of receivables rather than the loan that it actually is. Under this artificial structure, the funds that an MCA company provides are a purchase of your business’ future receivables rather than a loan. Your advance is based on cash received from your sales. The MCA company can then set terms of repayment that far exceed typical loan interest rates, which typically means the cost of this transaction is well beyond your ability to pay.
If you want to know how to get out of debt after taking on an MCA, our debt relief attorneys can help with your debt. We have legal strategies at our disposal to help you escape the debt-related challenges caused by merchant cash advances, so your business can get a fresh start.
A Merchant Cash Advance Can Be Bad News for Business. Debt Relief Can Set You Free.
If you’ve taken out a merchant cash advance, it’s likely your business has been struggling for some time. Although MCAs do have benefits in the short term, the fee structure for taking out one of these loans makes most businesses quickly second guess their decision to go down this road.
You may find that the company that provided your MCA now has a lien on your receivables. Because of your inability to meet your monthly payment, they’re beginning to collect on your debt through your bank account or merchant processing account. And if you attempt to stop paying, the MCA company may contact your customers directly, so your account receivables are rerouted directly to them. No one wants their customers to know that they’re in debt. This can further threaten your business’s livelihood on top of the payments you owe the MCA lender.
Additionally, most MCA companies are incorporated in states that passed constitutionally dubious legislation which enables the MCA company to obtain a judgment against you without ever serving the lawsuit. While this seems like an obvious violation of your constitutionally protected right to due process, MCA companies’ manipulation of laws meant to protect people illustrate how outrageously expensive these transactions are for your business.
However, Wink & Wink, Denver’s premier business debt relief attorneys, has a solution. Schedule a free consultation to find out more about how to get out of debt with our expertise.
Strategies for Debt Relief After a Merchant Cash Advance Gone Sour
Wink & Wink has several strategies for your business, depending on your particular circumstances. Our debt relief attorneys offer debt settlement and bankruptcy solutions to help with debt, including:
Debt settlement: As with any debt settlement solution, our first recommendation is that you stop paying the lender. You will save this money until you can offer a lump sum that the lender will accept. If you can save half of what you owe them, it is highly likely that they will accept this amount, after you’ve failed to pay for a few months.
To ensure you can save money, you will very likely have to set up an alternative merchant processing account and bank account. This way, you can get your receivables from clients without the lender touching them.
Thereafter, it is critical that your business save money for settling the MCA. Typically, you can settle these obligations for approximately 50% of what is owed. Stopping excessive, high-frequency payments while settling the obligation for a fraction of what is owed can often be the difference between your small business surviving or not.
Personal bankruptcy: While some of our clients ask us about filing for business bankruptcy, we often don’t recommend this because of the significant fees associated with this approach and the fact that nearly all MCAs will be personally guaranteed by the business owner. This means that you will be responsible for your company’s MCA liability if unpaid, even if your company files bankruptcy.
Because of this, Wink & Wink typically recommends filing personal bankruptcy if you cannot afford to settle your MCA liability. Under advice of the experienced attorneys at Wink & Wink, you will likely be able to keep operating your business as sole proprietor when you file bankruptcy. This is accomplished by dissolving your existing LLC or corporation and then operating as a sole proprietor. This can enable you to simultaneously leave the debt behind while also protecting up to $60,000 in business assets through Colorado’s tools of the trade exemption. Many businesses get a “second life” through this process and resume their business activities successfully.
Schedule with Wink & Wink Now for Business Debt Relief
Wink & Wink wants to demonstrate how you can get out of debt with our proven solutions. Our debt relief attorneys have helped countless businesses find a new path forward, and we want to do the same for you.
Avoid lenders that don’t have your best interest in mind and hope to take advantage of your business. Instead, work with Wink & Wink to find out how to get out of debt in a way that empowers you to keep your business going. We want to see you find a new path to a more prosperous future.