New Orleans, LA Merchant Cash Advance Defense Lawyers
Are you a small business owner in New Orleans struggling with a merchant cash advance (MCA) agreement? You‘re not alone. Many entrepreneurs in the Big Easy have turned to MCAs as a quick source of capital, only to find themselves trapped in a cycle of debt. But don‘t despair – our team of experienced MCA defense attorneys is here to help.At Delancey Street, we understand the unique challenges faced by New Orleans businesses. From the seasonal fluctuations of tourism to the lingering economic impacts of natural disasters, we know that cash flow can be unpredictable. That’s why so many local companies have been tempted by the siren song of merchant cash advances.But here’s the thing – MCAs often come with hidden costs and predatory terms that can sink your business faster than a leaky levee. Before you know it, you’re drowning in daily repayments and watching your profits evaporate.The good news? You have options. Our seasoned MCA defense lawyers have helped countless New Orleans entrepreneurs fight back against unfair lending practices and negotiate more favorable terms. We’ll put our legal expertise to work for you, so you can focus on what really matters – running your business and serving your community.In this article, we‘ll break down everything you need to know about merchant cash advances in Louisiana, including:
- The basics of how MCAs work
- Common legal issues and pitfalls to watch out for
- Your rights as a borrower under Louisiana law
- Strategies for negotiating with MCA providers
- When and how to pursue litigation
So grab a cup of chicory coffee, and let’s dive in. By the time you’re done reading, you‘ll be armed with the knowledge you need to protect your business and get back on solid financial footing.
Understanding Merchant Cash Advances in Louisiana
Before we get into the nitty-gritty of MCA defense, let’s start with the basics. What exactly is a merchant cash advance, and how does it differ from traditional business loans?In simple terms, an MCA is an advance on your future credit card sales. Here‘s how it typically works:
- The MCA provider gives you a lump sum of cash upfront
- In exchange, you agree to repay the advance plus fees through a percentage of your daily credit card transactions
- The repayment period usually lasts 3-18 months, depending on your sales volume
Sounds simple enough, right? Well, not so fast. There are some key differences between MCAs and traditional loans that you need to understand:
| Merchant Cash Advances | Traditional Business Loans |
|---|---|
| Not technically a loan | Regulated as a loan |
| Repayment based on % of sales | Fixed monthly payments |
| No set repayment term | Set repayment term |
| Daily or weekly withdrawals | Monthly payments |
| Typically higher cost | Lower interest rates |
| Easier qualification | Stricter requirements |
Now, you might be thinking – “Hey, that doesn’t sound so bad! I get cash fast and only repay when I’m making sales.” And sure, MCAs can seem appealing on the surface. But there’s a reason they‘re often called “payday loans for businesses.”The reality is that MCAs often come with sky-high effective interest rates – we‘re talking 50%, 100%, or even higher in some cases. And because the repayments are taken automatically from your daily sales, it can quickly become a vicious cycle that‘s hard to escape.Let’s look at a hypothetical example:
Joe’s Cafe on Bourbon Street takes out a $50,000 MCA with a factor rate of 1.4. This means they’ll need to repay $70,000 total. The MCA provider takes 15% of their daily credit card sales. If Joe’s averages $3,000 in daily card transactions, that’s $450 being withdrawn EVERY DAY. At that rate, it would take about 156 days to repay – if sales stay consistent. But what happens during the slow season? Joe could end up trapped in the agreement for much longer, watching his profits disappear.
This is where things can get dicey from a legal perspective. Many MCA providers use confusing contract language and fail to clearly disclose the true cost of the advance. They may also include onerous terms that make it nearly impossible for the business to get out of the agreement.That’s why it’s CRUCIAL to have an experienced attorney review any MCA contract before you sign. And if you’re already in an MCA agreement that’s causing problems, don‘t wait to seek legal help. The sooner you act, the more options you’ll have.
Common Legal Issues with Merchant Cash Advances in Louisiana
Now that we’ve covered the basics, let’s dive into some of the specific legal issues that often arise with MCAs in Louisiana. As MCA defense attorneys, these are the red flags we look for when reviewing contracts and building cases for our clients.
1. Usury and Interest Rate Caps
One of the biggest issues with MCAs is that they often skirt Louisiana‘s usury laws. Under La. Civ. Code Art. 2924, the maximum conventional interest rate for business loans is 12% per annum. But MCA providers argue that their products aren’t loans, so they don’t have to abide by these limits.This is a GRAY AREA legally speaking. Some courts have ruled that MCAs are indeed loans subject to usury laws, while others have sided with the MCA industry. In Louisiana specifically, there’s limited case law on the issue.However, we‘ve successfully argued in several cases that MCAs with effective APRs well over 100% violate the spirit of Louisiana‘s usury laws, if not the letter. The key is demonstrating that the MCA functions as a loan in practice, regardless of how it’s labeled.
2. Confusing or Deceptive Contract Terms
Many MCA agreements are intentionally vague or misleading about key terms like:
- The total cost of the advance
- How repayment amounts are calculated
- What constitutes a default
- Penalties for early repayment
This lack of transparency can violate Louisiana‘s Unfair Trade Practices and Consumer Protection Law (La. R.S. § 51:1401 et seq.). We‘ve seen cases where businesses were hit with massive unexpected fees or had their accounts frozen over minor payment fluctuations – all because of buried contract clauses they never understood.
3. Personal Guarantee Issues
It’s common for MCA providers to require a personal guarantee from the business owner. This means you’re on the hook personally if the business can‘t repay. But there are strict requirements for enforceable personal guarantees under Louisiana law.For example, La. Civ. Code Art. 3038 requires that a personal guarantee be “express and in writing.” We‘ve successfully challenged personal guarantees that were buried in fine print or not properly executed.
4. UCC Filing Abuse
Many MCA providers file UCC-1 financing statements against the business’s assets as soon as the agreement is signed. This can make it difficult to obtain other financing or sell the business.But under La. R.S. § 10:9-509, the filer must have authorization from the debtor to file a financing statement. We‘ve seen cases where MCA providers filed overly broad UCC statements without proper authorization, which can be grounds for removal.
5. Improper Collections Practices
When businesses fall behind on payments, some MCA providers resort to aggressive and potentially illegal collection tactics. This might include:
- Harassing phone calls or emails
- Contacting customers or vendors
- Threatening criminal prosecution
- Accessing bank accounts without authorization
These actions may violate the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) or Louisiana‘s own debt collection laws (La. R.S. § 9:3534 et seq.).The bottom line? If you’re dealing with any of these issues, you have legal options. Don‘t let predatory MCA providers bully you into submission. Our team of New Orleans MCA defense attorneys knows how to fight back and protect your rights under Louisiana law.