Nov 9, 2021
Have you taken out merchant cash advance loans that you cannot repay or have already defaulted on?Is your company drowning in debt, and you're seeking a way out?
In this post, we will discuss what occurs when a merchant cash advance is defaulted on, your alternatives for restructuring a merchant cash advance to avoid default and your options for finally dealing with your merchant cash advance concerns.
When you default on your merchant cash advance loans, a lawsuit will be launched soon after. Your merchant cash advance backer will use the judicial system to get a monetary judgment against you and your company. You will be served with a summons and complaint, which will force you to respond to the case within 20 or30 days, depending on whether you and your business are located inside or outside of the State where the action was filed.
A response must be filed on your behalf within the time-frame indicated. If no response is made on your behalf within the time frame specified, a default judgment may be entered against you and your company very immediately after the time has elapsed. If a judgment is obtained, you will no longer be able to contest the alleged debt or defend the litigation. Once a judgment has been entered against you and your company, theMCA lender who now owns the judgment against you can confiscate your assets, levy your bank accounts, and garnish your earnings.
When a merchant cash advance debt is defaulted on, lenders will attempt to freeze personal and business banking accounts, as well as contact your vendors or brokers and merchant processors to falsely state that their UCC liens are superior and that your merchant processors and vendors should pay them directly because you have defaulted on your loans.
If you use a payroll firm to pay your employees, the MCA lenders may also interfere with that relationship. This can ultimately damage your business, forcing you to close its doors permanently.
Before filing any lawsuit, ask yourself, "How can I modify my merchant cash advances to prevent defaulting on my debt payments?"
Before attempting to restructure your advances, you should carefully examine your firm. Internally, it is frequently easier to examine and restructure. There are numerous areas where prices could be reduced. What can monthly expenses be eliminated? Is it possible for you to rent equipment rather than buy it? Is it possible for you to outsource any work overseas to minimize labor costs? Is it possible to replace pricey phone systems with less-priced VOIP?
Any savings should be utilized to pay down existing debt, beginning with the highest interest debts.
Next, spend a day on the computer researching alternative financing choices that may be accessible to you. Your primary goal should be to secure better terms than the existing merchant cash advance terms, which you may be unable to satisfy in the future. Companies that specialize in aggregating merchant cash advance loans over significantly longer terms than conventional merchant cash advances exist. Although the interest rates are still significantly higher than what would be considered permissible in most jurisdictions (if it were a typical loan), it may still help you reduce your daily expenses.
There are more funding alternatives to investigate. You can determine if you qualify for an SBA loan, which generally has very reasonable interest rates and terms. You could look for a factoring provider to replace your merchant cash advance loans. Although it is not recommended, you could seek an additional merchant cash advance loan with better conditions than your present loans to help pay off your debts.
How do you feel about your relationships with your suppliers, vendors, and brokers (if your company uses brokers)? Consider contacting your vendors and suppliers, as well as your brokers, to try to renegotiate new terms. You may be able to renegotiate to reduce your operational costs, which will help you lower your payments.
When you have exhausted all other options for lowering your operational costs and you are still unable to afford your merchant cash advance payments comfortably, you should seek the assistance of a respected business to help you MCA restructure your merchant cash advances. There are numerous applications available to accomplish this. Let's go over them again.
Consolidating a merchant cash advance is similar to consolidating a personal loan. All of your merchant cash advances will be consolidated into a single loan. In theory, this loan should cut interest rates or prolong the terms, lowering your daily, weekly, or monthly payments. Unfortunately, with so much garbage and hidden fees, many of these loans look to help but ultimately leave you with the same or similar financial load as before the consolidation.There are plenty of alternative options to explore before reorganizing with a consolidation loan.
Reverse consolidations are a means of gradually easing the pressure of a liquidity crunch. A reverse consolidation firm will make a loan to you to cover your daily merchant cash advance payments. You would then make a payment to the reverse consolidation firm, typically 20 to 25% less than what you would usually pay to your merchant cash advance funders (freeing up your cash flow). This will be in force until your merchant cash advances are fully paid off.
The reverse consolidation firm will extend your terms, and you will continue to pay them until your agreed-upon fee is paid in full. This raises the overall cost of your loans over the life of the loan.
Merchant cash advance settlement is a process in which your debt is negotiated with your creditors for less than what you owe. It can be pretty successful if done by the proper firm. The most crucial thing to remember is that a lawsuit will undoubtedly be brought against you if you default on a merchant cash advance.
If the organization working on your merchant cash advance settlement negotiations is not a law firm, you should end the arrangement and seek the assistance of a qualified law firm.