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Strategies for Dealing with Merchant Cash Advance Lenders

by | Oct 6, 2021 | Bankruptcy, Bankruptcy, Debt, Business, Debt

Merchant cash advance agreements typically involve selling your business receivables at a price with a significant fee. This fee is repaid usually on a daily or weekly basis by debiting a certain percentage of your business receivables. These types of agreements are designed to be paid back rapidly, sometimes as quickly as just a few months. For many small business owners, these large payments can put a significant strain on the ability of their business to cash flow and meet other debt obligations.

Solutions to Cash Advance Hardships

If your business is experiencing financial hardship, closely review the merchant cash advance agreement because you may be able to request that the lender temporarily reduce the debits for a brief period of time. If a reduction in the debits is not sufficient enough for your business to cash flow, you might try to do a work out with the lender whereby a monthly settlement amount is proposed to be paid over an extended period of time. In addition to these monthly settlements, the lender may consider a lump sum discounted payoff that is paid in one or a few installments. Typically, merchant cash advance lenders do not want to agree to extended payoffs over several years. If you require an extended payoff of two years or longer, you may want to look at reorganizing your business through a chapter 11 bankruptcy. With the Small Business Reorganization Act of 2019, there were several changes to small business bankruptcy which now make the process more streamlined and affordable. Under the new small business law, you will have (90) ninety days to propose a repayment plan to your creditors. Chapter 11 bankruptcy can be a great option for restructuring your merchant cash advance debt if you are unable to work out a consensual resolution with the lender. Finally, if your business has no cash flow and needs to shut down, you may want to consider a chapter 7 liquidation for your company and if you signed a personal guaranty, you may also need to look at personal bankruptcy options.

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy and complex litigation. For more information please call (859) 231-5800, email [email protected] or reach us on our contact page.