Vermont Merchant Cash Advance Defense Lawyers
Introduction
Are you a Vermont business owner struggling to keep up with the relentless demands of a Merchant Cash Advance (MCA)? You’re not alone. Many small businesses find themselves caught in the vicious cycle of daily repayments and escalating debts. But don’t worry; we’re here to help. At Delancey Street, we specialize in defending businesses like yours against the predatory practices of MCA funders. Our experienced attorneys can provide the legal expertise you need to navigate this challenging landscape and regain control of your finances.
Understanding Merchant Cash Advances
Merchant Cash Advances (MCAs) are a popular but often misunderstood form of financing. Unlike traditional loans, an MCA provides businesses with a lump sum payment in exchange for a percentage of future credit card sales. This might sound like a lifeline, but it can quickly become a financial trap.
How MCAs Work
- Application and Approval: Businesses apply for an MCA and are approved for a specific amount, often ranging from $5,000 to $500,000.
- Lump Sum Payment: The MCA provider gives the business a lump sum upfront.
- Repayment: The business repays the advance by allowing the MCA provider to collect a percentage of daily credit card sales, typically between 8-15%, until the advance is repaid in full, including fees and interest.
- Variable Repayment Terms: Unlike traditional loans, MCAs do not have fixed monthly payments. The daily repayment amount varies based on sales volume, which can be unpredictable and burdensome.
Common Issues with MCAs
MCAs can be a double-edged sword. While they offer quick access to capital, they often come with exorbitant fees and interest rates that can cripple a business’s cash flow.
High Costs and Fees
Many businesses are unaware of the true cost of an MCA. Interest rates can exceed 100% APR, far above Vermont’s usury limit of 12% for loans under $500,000 (9 V.S.A. § 41a). This makes it nearly impossible for businesses to keep up with payments, leading to a cycle of debt.
Aggressive Collection Practices
MCA providers are notorious for their aggressive collection tactics. They may:
- File UCC liens: These liens can freeze your accounts and disrupt your business operations.
- Confessions of Judgment (COJ): Although banned in some states, COJs allow MCA providers to obtain uncontested judgments against you, leading to asset seizures without a court hearing.
- Daily ACH Withdrawals: These can drain your account, leaving you with insufficient funds to cover other essential expenses.
Legal Defenses Against MCAs
If you’re struggling with an MCA, it’s crucial to understand your legal options. Our experienced attorneys can help you navigate the complex legal landscape and defend your business against predatory MCA practices.
Reviewing MCA Contracts
One of the first steps we take is to review your MCA contract for any unlawful provisions. Under Vermont law, certain practices may be deemed illegal, such as:
- Usury Violations: Charging interest rates above the legal limit.
- Deceptive Trade Practices: Misleading terms and conditions that were not clearly disclosed at the time of agreement.
Negotiating Settlements
Our attorneys can negotiate with MCA providers to reduce the balance owed or restructure the repayment terms. This can involve:
- Sending Demand Letters: Requesting better repayment terms or a settlement offer.
- Refinancing: Helping you refinance into a more affordable payment program.
- Debt Restructuring: Assisting with bankruptcy or other debt relief options if necessary.
Key Vermont Laws Governing MCAs
Several Vermont laws and federal regulations can be leveraged to challenge predatory MCA practices:
- Vermont Consumer Protection Act: Prohibits unfair and deceptive business practices, which can be used to challenge predatory MCA tactics.
- Vermont’s UCC Article 9: Governs secured transactions like merchant cash advances and determines lien priority and enforcement rights.
- FTC Holder Rule: A federal law that preserves consumer defenses against MCA purchasers, potentially invalidating illegal MCA contracts.
- Vermont’s Rent-to-Own Statute: Requires certain disclosures and limits fees for rent-to-own transactions, which may apply to some MCA agreements.
Alternatives to High-Cost MCAs
If you’re considering an MCA but want to avoid the pitfalls, there are several alternative financing options available:
- SBA Loans: Government-backed small business loans with low fixed rates.
- Business Lines of Credit: Revolving credit accounts with interest charged only on what’s used.
- Invoice Factoring: Selling unpaid invoices to a factoring company for immediate cash.
- Equipment Financing: Loans using owned equipment as collateral.
- 401(k) Business Financing: Using personal retirement funds and repaying yourself over five years.
- Friends and Family Loans: Borrowing from people you know using simple loan agreements.
- Business Credit Cards: Charging expenses and paying over time with 0% intro APR offers.
- Crowdfunding: Raising small amounts from customers or supporters.
Case Studies and Client Stories
To illustrate the impact of our services, let’s look at a few anonymized client stories:
Case Study 1: Vermont Bakery
A small bakery in Vermont took out an MCA to expand its operations. However, the daily repayments quickly became unmanageable, and the business was on the brink of bankruptcy. Our attorneys reviewed the contract and identified several deceptive practices. We successfully negotiated a settlement that reduced the balance owed by 50% and restructured the repayment terms to a manageable monthly schedule.
Case Study 2: Vermont Retail Store
A retail store owner in Vermont was struggling with multiple MCAs. The daily ACH withdrawals were draining the business’s accounts, and UCC liens were filed against the business’s assets. We intervened, negotiated with the MCA providers, and consolidated the debts into a single, affordable payment plan. This allowed the business to stabilize its cash flow and continue operations without the constant threat of asset seizures.
Conclusion
Merchant Cash Advances can be a lifeline for businesses in need of quick capital, but they often come with significant risks and high costs. If you’re struggling with an MCA, don’t hesitate to seek legal help. At Delancey Street, we have the expertise and experience to defend your business against predatory MCA practices and help you regain control of your finances. Contact us today for a free consultation and take the first step towards financial freedom.
Call to Action
Ready to take control of your business’s financial future? Contact Delancey Street today for a free consultation. Let us help you navigate the complexities of Merchant Cash Advances and find a solution that works for you. Don’t let predatory lenders dictate your business’s success. Reach out to us now and reclaim your financial stability.