Baltimore, MD Merchant Cash Advance Defense Lawyers
Introduction
Merchant cash advances (MCAs) can be a lifeline for small businesses in Baltimore, MD, offering quick access to funds when traditional loans are not an option. However, these advances can sometimes turn into financial traps, leading to significant legal and financial challenges. At Delancey Street, we understand the complexities of MCAs and are here to help you navigate these turbulent waters. Whether you’re facing aggressive collection tactics or need to renegotiate terms, our experienced merchant cash advance defense lawyers are ready to assist you.
Understanding Merchant Cash Advances
Merchant cash advances are a type of financing where a business receives a lump sum of money in exchange for a portion of its future sales. Unlike traditional loans, MCAs are repaid through a percentage of daily or weekly credit card sales, making them a flexible option for businesses with fluctuating revenues. However, this flexibility comes at a cost, often involving high fees and interest rates that can quickly become burdensome.
Table: Key Differences Between MCAs and Traditional Loans
| Feature | Merchant Cash Advance (MCA) | Traditional Loan |
|---|---|---|
| Repayment Method | Percentage of sales | Fixed monthly payments |
| Collateral Requirement | Typically none | Often required |
| Approval Time | Quick (often within days) | Longer (weeks to months) |
| Interest Rates | Higher | Lower |
| Impact on Cash Flow | Variable | Fixed |
Common Concerns with MCAs
MCAs can seem like a quick fix for cash flow issues, but they come with several risks. One of the most significant concerns is the potential for the MCA to be classified as a loan, subject to state usury laws. In Maryland, the criminal usury statute (Md. Code Ann., Com. Law § 12-103) caps interest rates at 24% per annum. If an MCA is deemed a loan, excessive interest rates could render the agreement void and unenforceable.
Another concern is the use of Confessions of Judgment (COJs), which allow MCA providers to obtain a judgment against the borrower without a trial. This can lead to sudden and severe financial consequences, including bank account freezes and asset seizures. Recent legal developments, such as the New York State Attorney General’s actions against certain MCA providers, highlight the potential for abusive practices in this industry.
Legal Defenses Against MCAs
If you’re struggling with an MCA, there are several legal defenses that our team at Delancey Street can explore on your behalf:
- Usury Laws: We can argue that the MCA constitutes a loan with an interest rate that violates Maryland’s usury laws, potentially voiding the agreement.
- Fraud and Misrepresentation: If the MCA provider misrepresented the terms or failed to disclose critical information, we can challenge the validity of the agreement.
- Breach of Contract: If the MCA provider failed to adhere to the terms of the agreement, such as not adjusting payments based on sales fluctuations, we can pursue a breach of contract claim.
- Bankruptcy: In some cases, filing for bankruptcy may provide relief from MCA obligations, allowing you to reorganize your debts and protect your assets.
Case Studies and Hypothetical Scenarios
Consider the case of a small Baltimore restaurant that took out an MCA to cover renovation costs. The restaurant’s sales fluctuated seasonally, and during a slow period, the MCA payments became unsustainable. The MCA provider obtained a COJ, freezing the restaurant’s bank accounts and crippling its operations. Our team intervened, challenging the COJ on the grounds of usury and fraud. We successfully negotiated a settlement that reduced the debt and allowed the restaurant to continue operating.
Or imagine a Baltimore retail store that used an MCA to purchase inventory. The store owner was unaware of the high fees and interest rates, which quickly accumulated. Facing aggressive collection tactics, the owner turned to us for help. We identified several breaches of contract by the MCA provider and negotiated more favorable repayment terms, ultimately saving the business from closure.
Practical Advice for Business Owners
If you’re considering an MCA or already struggling with one, here are some practical tips:
- Read the Fine Print: Understand all terms and conditions, including fees, interest rates, and repayment schedules.
- Evaluate Alternatives: Consider other financing options, such as small business loans, lines of credit, or crowdfunding.
- Seek Professional Advice: Consult with a financial advisor or attorney before entering into an MCA agreement.
- Monitor Cash Flow: Keep a close eye on your business’s cash flow to ensure you can meet repayment obligations.
- Negotiate Terms: Don’t be afraid to negotiate more favorable terms with the MCA provider.
Conclusion
Merchant cash advances can be both a blessing and a curse for Baltimore businesses. At Delancey Street, we are committed to helping you navigate the complexities of MCAs and protect your business from predatory practices. If you’re facing legal challenges related to an MCA, don’t hesitate to contact us for a consultation. We’re here to provide the dedicated support and advocacy you need to get back on track.
Call to Action: If you’re struggling with an MCA or need legal advice, reach out to us today. Our experienced merchant cash advance defense lawyers are ready to help you find a solution. Contact us at Delancey Street for a case evaluation and take the first step towards financial relief.
