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Florida Merchant Cash Advance Defense Lawyers: Protecting Your Business from Predatory Practices

Are you a small business owner in Florida who‘s feeling OVERWHELMED by merchant cash advance (MCA) debt? You‘re not alone. Many entrepreneurs find themselves trapped in a cycle of high-cost financing that can threaten the very existence of their business. But there’s hope! Our team of experienced Florida merchant cash advance defense lawyers at DelanceyStreet.com is here to help you navigate these treacherous waters and fight back against predatory MCA practices.In this comprehensive guide, we’ll explore the world of merchant cash advances in Florida, the legal landscape surrounding them, and how our skilled attorneys can help protect your business interests. So grab a cup of coffee, settle in, and let‘s dive into the nitty-gritty of MCA defense!

What Exactly is a Merchant Cash Advance?

Before we get into the legal nitty-gritty, let‘s break down what a merchant cash advance actually is. Picture this: You’re a small business owner in sunny Florida, maybe running a beachside restaurant or a trendy boutique in Miami. Business is good, but you need some quick cash to expand or cover unexpected expenses. That‘s where an MCA comes in.A merchant cash advance isn’t technically a loan (though it sure can feel like one!). Instead, it’s a transaction where a company BUYS a portion of your future credit card sales. They give you a lump sum upfront, and in return, you agree to pay back a larger amount through daily or weekly deductions from your credit card transactions.Sounds simple enough, right? Well, not so fast. Here‘s where things can get tricky:

1. Sky-high costs: MCAs often come with effective annual percentage rates (APRs) that would make your head spin. We’re talking triple digits in some cases!
2. Daily deductions: Unlike traditional loans with monthly payments, MCAs typically take a bite out of your sales every single day. This can seriously mess with your cash flow.
3. Confusing terms: MCA agreements are often filled with complex legal jargon that can be hard for the average business owner to understand.
4. Rapid repayment: Most MCAs are designed to be paid back within 3-18 months, which can put a major strain on your finances.

Now, you might be thinking, “If these things are so risky, why do people use them?” Good question! MCAs can be tempting because they’re often easier to qualify for than traditional bank loans, especially for businesses with less-than-perfect credit. Plus, the application process is usually quick, and you can get funds in a matter of days.But as many Florida business owners have learned the hard way, the convenience of MCAs can come at a steep price. That’s where our team of expert MCA defense lawyers comes in. We’re here to help you understand your rights, explore your options, and fight back against unfair practices.

The Legal Landscape of Merchant Cash Advances in Florida

Now that we’ve got the basics down, let’s talk about how Florida law views merchant cash advances. This is where things get really interesting (and by interesting, we mean potentially confusing and frustrating for business owners).

Are MCAs Loans or Not? The Million-Dollar Question

In Florida, as in many other states, the legal status of MCAs is… complicated. The key issue revolves around whether MCAs should be classified as loans or as purchases of future receivables. This distinction is CRUCIAL because it determines whether usury laws apply.Here’s the deal: If an MCA is considered a loan, it would be subject to Florida‘s usury laws, which cap interest rates at 18% for loans under $500,000 and 25% for larger amounts (Florida Statutes § 687.02). But if it’s classified as a purchase of future receivables, those limits don’t apply.So far, Florida courts have generally leaned towards classifying MCAs as purchases rather than loans. For example, in the case of Merchant Advance v. Fleetwood Services, LLC (2019), a Florida court held that the MCA agreement in question was not a loan because repayment was contingent on the merchant‘s future receivables.But here‘s where it gets tricky: Just because a contract calls itself a purchase of future receivables doesn‘t mean the courts will automatically agree. They’ll look at the substance of the agreement, not just its form.

Key Factors Courts Consider

When determining whether an MCA is a loan or a purchase, Florida courts typically look at several factors:

1. Recourse vs. Non-Recourse: Does the agreement give the MCA provider full recourse against the merchant if the business fails? If so, it might look more like a loan.
2. Fixed Repayment Period: Is there a specific date by which the full amount must be repaid, regardless of the business’s performance? This could suggest it’s a loan.
3. Reconciliation Provisions: Does the agreement allow for adjustments based on the merchant’s actual sales? This supports the “purchase” classification.
4. Risk of Loss: Does the MCA provider assume any real risk if the business doesn’t generate enough sales? If not, it might be viewed as a loan.
5. Personal Guarantees: While not determinative on their own, personal guarantees can be a factor in classifying an MCA as a loan.

Let’s look at a real-world example. In Kabbage, Inc. v. Goodwin (2021), a Florida court examined an MCA agreement that included a “reconciliation” provision allowing the merchant to request adjustments to the daily payment amount based on their sales. The court found that this provision supported classifying the agreement as a purchase rather than a loan.