Indianapolis, IN Merchant Cash Advance Defense Lawyers
Understanding Merchant Cash Advances (MCAs)
Merchant Cash Advances (MCAs) are a popular financing option for small businesses in Indianapolis, IN, seeking quick capital. Unlike traditional loans, an MCA provides a lump sum payment in exchange for a percentage of future credit card sales or daily bank deposits. This arrangement appeals to businesses that may not qualify for conventional loans due to poor credit or urgent funding needs. However, the seemingly straightforward nature of MCAs often masks complex terms and high costs, leading to significant financial strain for many businesses.
Key Characteristics of MCAs:
- Repayment Structure: Payments are made daily or weekly as a percentage of sales, which can disrupt cash flow.
- Factor Rates: Instead of interest rates, MCAs use factor rates, leading to effective APRs often exceeding 100%.
- No Fixed Term: Repayment continues until the advance and fees are fully repaid, regardless of business performance.
Common Legal Issues with MCAs
Businesses in Indianapolis frequently encounter several legal challenges with MCAs, often due to the predatory nature of these agreements. Here are some common disputes:
1. Misrepresentation of Terms:
Imagine a small restaurant owner who agrees to an MCA with a factor rate of 1.4, translating to an APR over 100%. If the lender fails to explain this adequately, the business might struggle with daily repayments, leading to legal disputes.
2. Breach of Contract:
A retail store owner might discover hidden fees not disclosed during negotiations. Feeling deceived, the owner stops payments, prompting the lender to sue for breach of contract.
3. Usury Claims:
Under Indiana law, interest rates over 72% are considered criminal loansharking. Many MCA agreements exceed this threshold, leading to potential usury defenses.
Legal Defenses Against MCA Lawsuits
If your business is facing an MCA lawsuit in Indianapolis, several legal defenses can be employed. Here are some strategies:
1. Usury Defense:
Indiana law caps interest rates at 72%. If your MCA agreement’s effective APR exceeds this, you might argue that the agreement constitutes a criminally usurious loan. This defense can lead to the agreement being voided.
2. Unconscionability:
Argue that the MCA terms are unfairly one-sided and exploitative. Courts may find the agreement unenforceable if it shocks the conscience.
3. Fraud and Misrepresentation:
If the lender misrepresented the terms or failed to disclose critical information, you could claim fraud. Evidence such as emails, recorded conversations, and witness testimonies can support this defense.
Case Law and Legal Precedents
Understanding relevant case law is crucial for mounting a robust defense. Here are some notable cases:
1. Tender Loving Care Homes Inc. v. Reliable Fast Cash, LLC:
This case examined whether an MCA was a disguised usurious loan. The court held that the agreement was a legitimate purchase of receivables, not a loan, primarily because repayment was contingent on business revenue. However, the unjust enrichment claim proceeded due to discrepancies in payment recordings.
2. Global Merchant Cash Inc. v. LPZ Carriers LLC:
The court denied the plaintiff’s motion for summary judgment due to improper authentication of the MCA agreement. This case highlights the importance of adhering to procedural rules in MCA disputes.
Practical Advice for Business Owners
Facing an MCA lawsuit can be daunting, but there are steps you can take to protect your business:
- Gather Evidence: Collect all relevant documents, including the MCA agreement, payment records, and communications with the lender.
- Seek Legal Counsel: Consult with an experienced MCA defense attorney to explore your legal options and develop a defense strategy.
- Negotiate: Often, lenders are willing to negotiate settlements to avoid lengthy court battles. Your attorney can help negotiate favorable terms.
Finding the Right Attorney
Choosing the right attorney is critical for successfully defending against an MCA lawsuit. Here’s what to look for:
- Experience: Select an attorney with a proven track record in MCA defense and business debt relief.
- Knowledge: Ensure they understand the nuances of MCA agreements and relevant state and federal laws.
- Communication: A good attorney will keep you informed and involved throughout the process.
Conclusion
Merchant Cash Advances can be a double-edged sword for small businesses in Indianapolis, offering quick capital but often leading to legal and financial troubles. If you find yourself entangled in an MCA dispute, understanding your legal rights and defenses is crucial. With the help of our experienced attorneys at Delancey Street, we can navigate the complexities of MCA agreements, defend your business in court, and negotiate favorable settlements. Don’t face predatory lenders alone—contact us today to protect your business and secure your financial future.