Nov 9, 2021
As a small business owner, you understand how difficult it is to manage cash flow. A capital injection can help you expand your firm by recruiting more personnel, purchasing new equipment, and purchasing goods. It can also assist you in smoothing out slow months and ensuring that staff (and you) get paid. However, taking on too much debt, especially the wrong kind of debt, can jeopardize your business.
Traditional bank loans were less readily available for smaller, less established small enterprises like yours in the aftermath of the financial crises. Even SBA loans are out of reach or too time-consuming for many business owners, leaving them with no choice but to rely on more expensive and riskier alternative financing options like credit cards, invoice factoring, and Merchant Cash Advance (MCA).
MCAs are small company loans that can provide you with quick access to the funds you want. Instead of monthly installment payments, the lender takes a percentage of your future credit card sales until the debt is paid off. Typically, merchant cash advances are only offered to small firms with verifiable debit and credit card purchases. However, when compared to other types of small business finance, they are pretty simple to obtain.
Furthermore, you can generally be accepted and receive the needed lump sum within a few days.
The most important thing to know about getting out of MCA loans is that it is doable, even if you are in merchant cash advance default. Here are a few actions you might want to consider. Use a term loan to consolidate your debts.
Consider asking for a term loan and using the proceeds to pay off your merchant cash advance if your credit is in excellent standing. If you are in MCA default, the sooner you return your debt, the less impact it will have on your business and potentially even your personal credit history. Most of the time, you don't have the time to wait for a standard bank loan, which can take weeks to get. The good news is that many internet business lenders provide reasonably priced solutions with speedier funding timelines.
A high-interest term loan could save you money over a triple-digit APR merchant cash advance even if your credit isn't perfect. Depending on the loan, you may have as little as a year or as much as many years to settle the amount.Choose a repayment period based on your ability to pay. However, keep in mind that replacing an MCA with new debt will not solve all of your troubles, but it will assist in mitigating their severity.
Consider getting a secured loan if you have any significant assets that can be used as collateral for a loan, such as real estate, heavy machinery, vehicles, or other equipment. Secured business loans work in the same way that normal term loans do. Nonetheless, they sometimes have lower interest rates because the lender knows that if you fail to repay what you owe, they can seize the collateral to collect their money. However, if your company's finances are in disarray, you should reconsider. Otherwise, losing that asset is a real possibility. Also, avoid using personal assets as collateral because losing them could have a much more significant negative impact on your financial situation.
If you have an MCA loan that has gone into default, you may have already been getting phone calls from collection agencies. These phone calls can often feel like harassment, and you may even receive threats, despite federal law barring debt collectors from engaging in such behavior. In some situations, creditors may choose to file a lawsuit and ask a judge to order garnishments, and bank account freezes to force collection. Many MCA contracts include a confession of judgment clause, which prevents you from defending yourself if taken to court.
Furthermore, debt collectors generally buy debts for cents on the dollar, so they will almost certainly earn a profit even if they settle. You can technically try to settle on your own, but you may be at a considerable disadvantage. After all, debt collectors do this for a job, so they're well-versed in the settlement process. Consider hiring a debt attorney to assist you with this procedure instead of handling it yourself.They can not only assist you in responding in your best interests, but they can also inform you of your rights and assist you in protecting them.
If your financial position is so terrible that no other options are available, you may want to consider declaring bankruptcy to get the debt dismissed. The bankruptcy procedure can be complicated, so it's essential to employ an attorney to guide you through it and help you determine whether bankruptcy is the best option for your situation.
The method for getting out of a merchant cash advance isn't simple — there isn't one approach that works for everyone. As a result, it's critical to examine each alternative and weigh its advantages and disadvantages. Then you should consider your financial circumstances and decide which option is ideal from that standpoint.
Applying for a term loan or a secured loan, for example, is appropriate if you have the necessary cashflow to meet the monthly installments. If you don't, you might still be dealing with some of the same issues you are now.
Debt settlement is a good option for people who don't have good credit and can't afford to make hefty monthly payments. However, you will want revenue to acquire sufficient funds with which to bargain.
Finally, just like in a personal debt situation, bankruptcy should be viewed as a last choice.Otherwise, you may end up destroying your credit score unnecessarily.