Denver, CO Merchant Cash Advance Defense Lawyers
Are you a small business owner in Denver struggling with a merchant cash advance (MCA) that’s draining your company’s finances? You’re not alone. Many entrepreneurs find themselves trapped in predatory MCA agreements that threaten to sink their businesses. But there’s hope! Our experienced team of MCA defense attorneys at DelanceyStreet can help you fight back and protect your livelihood.
What is a Merchant Cash Advance?
Before we dive into the legal nitty-gritty, let’s break down what an MCA actually is. A merchant cash advance is NOT a loan – at least that’s what the MCA companies want you to believe. Instead, it’s structured as a “purchase” of your future receivables or credit card sales.Here’s how it typically works:
- The MCA company gives you a lump sum of cash upfront
- In exchange, you agree to pay back a larger amount through daily or weekly deductions from your business’s revenue
- The repayment amount is usually a fixed percentage of your sales until the full amount is repaid
Sounds simple enough, right? WRONG. The devil is in the details, and MCA agreements are packed with complex legal language designed to trap unsuspecting business owners.
The MCA Trap
MCAs often come with sky-high effective interest rates that can exceed 100% APR or more. Since they’re not technically “loans,” they can sidestep usury laws that cap interest rates. This means your business could end up paying back 2-3 times the amount you originally received – or even more!But wait, it gets worse. Many MCA agreements include:
- Confessions of judgment
- Personal guarantees
- Liens on business assets
- Daily ACH withdrawals from your bank account
Before you know it, your cash flow is strangled and you’re struggling just to keep the lights on. That’s where we come in.
How Our Denver MCA Defense Lawyers Can Help
At DelanceyStreet, we’ve seen firsthand the devastation that predatory MCAs can wreak on small businesses. That’s why we’re passionate about fighting for the rights of entrepreneurs like you. Our experienced attorneys know all the tricks and tactics used by MCA companies, and we’re not afraid to go toe-to-toe with them in court.Here are just a few ways we can help defend your business:
1. Analyze Your MCA Agreement
The first step is a thorough review of your MCA contract. Our lawyers will comb through every clause to identify potential violations or unfair terms. We’ll look for things like:
- Hidden fees or charges
- Unclear or deceptive language
- Violations of state or federal lending laws
- Unconscionable terms
2. Challenge the Validity of the Agreement
In many cases, we can argue that the MCA is actually a disguised loan subject to usury laws. This can potentially void the entire agreement or significantly reduce what you owe.For example, in the case of K9 Bytes, Inc. v. Arch Capital Funding, LLC, 56 Misc. 3d 807 (N.Y. Sup. Ct. 2017), the court found that the MCA agreement in question was actually a loan subject to usury laws. This allowed the business owner to challenge the validity of the entire agreement.
3. Negotiate with the MCA Company
Armed with our legal analysis, we can often negotiate more favorable terms with the MCA provider. This might include:
- Reducing the total repayment amount
- Lowering daily or weekly payments
- Extending the repayment period
- Removing personal guarantees or liens
4. Defend Against Legal Action
If the MCA company has already filed a lawsuit or obtained a judgment against you, we can help. Our attorneys have extensive experience defending against:
- Confessions of judgment
- UCC lien filings
- Bank account levies
- Asset seizures
5. Explore Bankruptcy Options
In some cases, Chapter 11 bankruptcy reorganization may be the best option to restructure your debts and save your business. Our team can guide you through this process and help you make the best decision for your company’s future.
Recent Legal Developments in MCA Defense
The legal landscape surrounding MCAs is constantly evolving. Here are some recent developments that could impact your case:
New York’s Commercial Finance Disclosure Law
In 2020, New York passed the Commercial Finance Disclosure Law (CFDL), which requires MCA providers to disclose key terms like the APR and total cost of financing. While this law doesn’t directly apply to Colorado businesses, it’s part of a growing trend towards increased regulation of MCAs.
Federal Trade Commission (FTC) Scrutiny
The FTC has been cracking down on deceptive practices in the MCA industry. In 2020, they filed a lawsuit against RCG Advances, LLC for allegedly using deceptive marketing tactics and unfair collection practices.
Usury Defense Gains Traction
Courts are increasingly willing to look beyond the surface structure of MCA agreements to determine if they’re actually loans subject to usury laws. For example, in LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 A.D.3d 664 (N.Y. App. Div. 2020), the court found that the MCA agreement was a loan disguised as a purchase of future receivables.
Why Choose DelanceyStreet for Your MCA Defense?
When you’re facing financial pressure from an MCA, you need a legal team that understands the complexities of these agreements and knows how to fight back. Here’s why DelanceyStreet should be your top choice:
- Experience: We’ve handled hundreds of MCA cases and have a proven track record of success.
- Expertise: Our attorneys stay up-to-date on the latest legal developments in MCA litigation.
- Aggressive Advocacy: We’re not afraid to take on even the biggest MCA companies.
- Personalized Approach: We tailor our strategy to your unique situation and goals.
- Compassion: We understand the stress you’re under and treat you with empathy and respect.
Don’t let an MCA agreement destroy the business you’ve worked so hard to build. Contact DelanceyStreet today for a free consultation with one of our Denver MCA defense lawyers. We’ll review your case and help you understand your options for fighting back.
Common MCA Defense Strategies
When it comes to defending against predatory MCAs, our attorneys employ a variety of strategies tailored to each client’s unique situation. Here are some of the most effective approaches we’ve used:
1. Challenging the “True Nature” of the Agreement
One of our primary strategies is to argue that the MCA is actually a loan in disguise. This is crucial because if we can prove it’s a loan, it becomes subject to usury laws and other regulations.Key factors we look at include:
- Fixed daily payments (rather than a percentage of sales)
- Personal guarantees
- Lack of reconciliation periods
- Excessive fees and charges
In the case of IBIS Capital Group, LLC v. Four Paws Orlando LLC, No. 2018-51868 (N.Y. Sup. Ct., Mar. 8, 2019), the court found that the MCA agreement was “in substance a usurious loan” due to factors like these.
2. Unconscionability Arguments
We often argue that MCA agreements are unconscionable due to their one-sided nature and the extreme imbalance of power between the parties. This can include:
- Lack of meaningful choice (e.g., business in dire financial straits)
- Unfair surprise (hidden terms or fees)
- Grossly unfair terms
3. Fraud and Misrepresentation Claims
In some cases, we can show that the MCA company engaged in fraudulent or deceptive practices when selling the advance. This might include:
- Misrepresenting the nature of the agreement
- Hiding key terms or fees
- Making false promises about refinancing or renewals
4. Violations of State and Federal Laws
We carefully review MCA agreements for violations of various laws, including:
- Truth in Lending Act (TILA)
- Fair Debt Collection Practices Act (FDCPA)
- Uniform Commercial Code (UCC)
- State usury laws
Even if the MCA isn’t considered a loan, violations of these laws can provide leverage in negotiations or grounds for voiding the agreement.
5. Procedural Defenses
If the MCA company has already taken legal action, we may be able to challenge the process itself. This can include:
- Improper service of legal documents
- Lack of standing to sue
- Statute of limitations issues
- Improper venue
Case Study: How We Saved a Denver Restaurant from MCA Disaster
Let’s look at a real-world example of how our MCA defense strategies can make a difference. (Note: Names and some details have been changed to protect client confidentiality)The Client: John’s Pizzeria, a family-owned restaurant in Denver struggling with cash flow issues due to the pandemic.The Problem: John took out a $100,000 MCA with daily payments of $1,500, effectively draining his business’s bank account each day.Our Approach:
- We thoroughly reviewed the MCA agreement and found several red flags:
- Fixed daily payments unrelated to actual sales
- An effective APR of over 200%
- A confession of judgment clause
- Unclear language about fees and charges
- We filed a lawsuit against the MCA company arguing that:
- The agreement was actually a disguised loan subject to Colorado’s usury laws
- The terms were unconscionable and unenforceable
- The MCA company had misrepresented key terms during the sales process
- We obtained a temporary restraining order to stop the daily ACH withdrawals while the case was pending.
- Through aggressive negotiation and the threat of continued litigation, we were able to reach a settlement that:
- Reduced the total repayment amount by 40%
- Lowered the daily payment to a manageable level
- Removed the confession of judgment and personal guarantee
The Result: John’s Pizzeria was able to stay in business, restructure its finances, and eventually return to profitability.This case illustrates how our multi-faceted approach to MCA defense can achieve real results for small business owners like you.
The Importance of Acting Quickly
If you’re struggling with an MCA, time is of the essence. The longer you wait to seek legal help, the fewer options you may have. Here’s why it’s crucial to act fast:
- Preserving Cash Flow: Every day that passes means more money drained from your business. The sooner we can stop or reduce payments, the better chance your business has of surviving.
- Preventing Legal Action: Many MCA agreements include confessions of judgment that allow the company to obtain a judgment against you without notice. Acting quickly can help prevent this.
- Maintaining Negotiating Power: The stronger your financial position, the more leverage we have in negotiations with the MCA company.
- Protecting Your Credit: Defaulting on an MCA can severely damage your personal and business credit. Early intervention can help mitigate this risk.
- Exploring All Options: The earlier you seek help, the more options we have available, from negotiation to litigation to potential bankruptcy protection.
Don’t wait until your business is on the brink of collapse. If you’re feeling overwhelmed by an MCA, contact DelanceyStreet today for a free consultation. Our Denver MCA defense lawyers are ready to fight for you and your business.
Frequently Asked Questions About MCA Defense
We know you probably have a lot of questions about MCAs and your legal options. Here are some of the most common questions we hear from clients:
Q: Can I just stop paying my MCA?
A: While it may be tempting, simply stopping payments is usually not advisable. This can trigger severe consequences like:
- Legal action against you and your business
- Seizure of assets
- Damage to your credit score
- Potential criminal charges for breach of contract
It’s crucial to consult with an experienced MCA defense attorney before taking any action.
Q: The MCA company says they’re not bound by usury laws. Is this true?
A: This is a common claim by MCA companies, but it’s not always accurate. While MCAs are structured as purchases of future receivables rather than loans, courts are increasingly willing to look beyond this surface structure.In the case of LG Funding, LLC v. United Senior Props. of Olathe, LLC, 181 A.D.3d 664 (N.Y. App. Div. 2020), the court found that the MCA agreement was actually a loan subject to usury laws despite its label as a purchase of future receivables.
Q: I signed a personal guarantee. Am I personally liable for the MCA?
A: Personal guarantees are common in MCA agreements, but they’re not always enforceable. We may be able to challenge the validity of the personal guarantee based on factors like:
- Lack of consideration
- Fraudulent inducement
- Unconscionability
Even if the guarantee is valid, we can often negotiate to have it removed or limited as part of a settlement.
Q: Can bankruptcy help with my MCA debt?
A: Bankruptcy can be a powerful tool for dealing with MCA debt, but it’s not right for everyone. Chapter 11 reorganization can allow you to restructure your debts and potentially reduce what you owe on the MCA.However, bankruptcy also has serious consequences and should only be considered after careful consultation with an attorney.
Q: The MCA company filed a UCC lien against my business. What does this mean?
A: A UCC lien gives the MCA company a security interest in your business assets. This can make it difficult to obtain additional financing and could allow the company to seize assets if you default.We can often challenge these liens or negotiate their removal as part of our defense strategy.
Q: How much does MCA defense cost?
A: The cost of MCA defense varies depending on the complexity of your case and the approach we take. We offer flexible fee arrangements and will work with you to find a solution that fits your budget.Remember, the cost of not defending against a predatory MCA can be far greater in the long run.
Take Action Now to Protect Your Business
If you’re a Denver business owner struggling with an MCA, don’t wait another day to get help. The experienced MCA defense lawyers at DelanceyStreet are ready to fight for you and your business.We offer:
- Free initial consultations
- Personalized legal strategies
- Aggressive advocacy
- Compassionate support
Don’t let an MCA destroy everything you’ve worked so hard to build. Contact DelanceyStreet today and take the first step towards financial freedom for your business.