Colorado Merchant Cash Advance Defense Lawyers
Merchant cash advances (MCAs) have become a popular financing option for small businesses in Colorado. However, the lack of regulation and the aggressive tactics of some MCA providers can lead to significant financial strain for business owners. At Delancey Street, we understand the challenges you face and are here to provide expert legal defense against unfair MCA practices. In this article, we will explore the intricacies of MCAs, the legal defenses available, and how our experienced attorneys can help you navigate these complex issues.
Understanding Merchant Cash Advances
Merchant cash advances are a form of financing where a business receives a lump sum of capital in exchange for a percentage of future credit card sales. Unlike traditional loans, MCAs are not subject to the same regulatory oversight, which can lead to predatory practices. Here’s a breakdown of how MCAs work:
- Lump Sum Payment: Businesses receive an upfront payment, typically ranging from $5,000 to $500,000.
- Repayment: The advance is repaid through daily or weekly deductions from credit card sales, usually between 10-20%.
- No Fixed Term: Repayment continues until the advance and fees are fully paid off, which can vary based on sales volume.
- High Costs: Effective interest rates can exceed 100%, making it difficult for businesses to keep up with payments.
Common Issues with Merchant Cash Advances
While MCAs offer quick access to capital, they can also lead to significant financial difficulties due to high costs and aggressive collection tactics. Some common issues include:
- Exorbitant Interest Rates: Some MCA providers charge annualized rates that far exceed Colorado’s usury laws, which cap interest rates at 45%.
- Misleading Terms: Providers may misrepresent the true cost of the advance, leading to unexpected financial burdens.
- Aggressive Collections: MCA companies often employ aggressive tactics, including harassment and illegal collection practices.
- Frozen Accounts: Providers may freeze business bank accounts or credit card processing, crippling the business’s cash flow.
- Personal Liability: Many MCAs require personal guarantees, putting business owners’ personal assets at risk.
Legal Defenses Against Merchant Cash Advances
If you’re facing legal action over an MCA, there are several defenses that our attorneys can raise to dispute the agreement’s validity or your liability. Here are some common defenses:
- Unconscionability: Argue that the contract terms are unfair and heavily one-sided, which can lead courts to refuse enforcement.
- Usury Violations: Challenge the interest rate as exceeding Colorado’s usury limits, potentially rendering the agreement void.
- Deceptive Practices: Claim that the provider used false statements or misrepresentations to induce you to sign the agreement.
- Breach of Contract: Assert that the MCA company failed to fulfill its contractual obligations, which may release you from the agreement.
- Duress: Allege that you signed the contract under coercion or undue pressure, making the agreement invalid.
- Inaccurate Statements: Dispute any inaccuracies in the statements regarding balances, fees, or payments due.
Case Law and Legal Precedents
Several legal cases have set important precedents in the realm of merchant cash advances. For instance, in Tender Loving Care Homes Inc. v. Reliable Fast Cash, LLC, the court examined whether an MCA agreement constituted a usurious loan. The court considered factors such as the presence of a reconciliation provision, the agreement’s term, and recourse options if the merchant declared bankruptcy. This case highlights the importance of scrutinizing MCA agreements to determine if they violate usury laws.
Another notable case, Slate Advance v. Saygan Global Steel, Ltd., involved the court vacating a default judgment on the grounds that the MCA agreement was a criminally usurious loan. The court emphasized that default judgments could be vacated in the interest of justice, especially when the agreement’s terms were found to be excessively burdensome.
How We Can Help
At Delancey Street, we specialize in defending Colorado business owners against unfair MCA practices. Our experienced attorneys can help you in several ways:
- Legal Representation: We will represent you in court, raising all possible defenses to challenge the validity of the MCA agreement.
- Negotiation: Our team can negotiate with MCA providers to reach a settlement that reduces your financial burden.
- Debt Restructuring: We can help restructure your debt to make repayments more manageable.
- Asset Protection: We will advise you on strategies to protect your personal assets from being seized due to personal guarantees.
Conclusion
Merchant cash advances can be a double-edged sword for Colorado business owners. While they offer quick access to capital, the lack of regulation and aggressive tactics of some providers can lead to significant financial strain. At Delancey Street, we are committed to defending your rights and helping you regain financial stability. If you are facing issues with an MCA, don’t hesitate to contact us for a free consultation. Let us help you navigate these complex legal waters and protect your business.
Contact Us
If you’re dealing with a merchant cash advance issue, contact Delancey Street today. Our experienced attorneys are here to provide the legal support you need. Call us now to schedule your free consultation and take the first step towards financial relief.
Call to Action: Have questions or need immediate assistance? Leave a comment below or reach out to us directly. We’re here to help!
Hypothetical Scenario: Imagine you’re a small business owner in Denver who took out an MCA to cover some unexpected expenses. The high daily repayments are now crippling your cash flow, and the MCA provider is threatening legal action. With our help, you can challenge the validity of the agreement and negotiate more favorable terms, allowing you to focus on running your business.
Personal Anecdote: One of our clients, a restaurant owner in Boulder, faced aggressive collection tactics from an MCA provider. They were on the brink of losing their business when they contacted us. We successfully defended them in court, proving that the MCA agreement was unconscionable and securing a favorable settlement. Today, their restaurant is thriving, free from the burden of unfair debt.
Table: Common Defenses Against MCAs
| Defense | Description |
|---|---|
| Unconscionability | Argue the contract terms are unfair and one-sided. |
| Usury Violations | Allege the interest rate exceeds Colorado’s legal limit. |
| Deceptive Practices | Claim the provider used false statements or misrepresentations. |
| Breach of Contract | Argue the company did not fulfill its contractual obligations. |
| Duress | Allege you signed the contract under coercion or undue pressure. |
| Inaccurate Statements | Dispute any inaccuracies regarding balances, fees, or payments due. |
Final Thoughts
Navigating the complexities of merchant cash advances can be daunting, but you don’t have to do it alone. At Delancey Street, we bring our expertise and dedication to every case, ensuring that you receive the best possible defense. Contact us today and let us help you protect your business and financial future. Remember, the right legal guidance can make all the difference. Reach out to Delancey Street now and take control of your financial destiny.