Virginia Merchant Cash Advance Defense Lawyers
Hey there! Navigating the world of merchant cash advances (MCAs) can be a real headache, especially when you’re a small business owner in Virginia. But don’t worry, we’re here to help. At Delancey Street, we specialize in defending businesses against the often predatory practices of MCA funders. Our team understands the ins and outs of Virginia’s MCA laws and can offer you the legal support you need to protect your business. Let’s dive into the details of what we do and how we can help you.
Understanding Merchant Cash Advances
First off, what exactly is a merchant cash advance? Simply put, it’s a way for businesses to get quick cash by selling a portion of their future credit card sales to an MCA company. The business gets a lump sum upfront, and the MCA company takes a fixed percentage of their credit card revenue until the advance is paid back. Sounds simple, right? But the reality is often much more complicated.
Pros:
- Fast approval and funding – you can get cash in your account in a few days.
- No collateral required like with a bank loan.
- Can be used for any business need – inventory, marketing, payroll, etc.
- Approval based on credit card sales, not personal credit score.
Cons:
- Very high interest rates, often over 100% APR.
- Daily or weekly payments can strain cash flow.
- If sales drop, payback period extends further.
- Not regulated like loans, so fewer consumer protections.
So, while MCAs provide quick cash, they can be extremely expensive and risky compared to other financing options. You need to weigh the benefits and drawbacks carefully.
Virginia’s Merchant Cash Advance Laws
Virginia has specific laws governing MCAs, aimed at protecting small businesses from predatory lending practices. In 2022, Virginia passed House Bill 1027, which went into effect on July 1st. This law does several key things:
- Registration Requirement: MCA companies must register with Virginia’s State Corporation Commission.
- Disclosure Requirements: MCA companies must provide certain pre-funding disclosures, including the total amount provided, the fixed daily/weekly amount to be debited, the estimated payback amount, and the estimated payback period.
- Prohibition of Personal Guarantees and Confessions of Judgment: MCA companies cannot require personal guarantees or confessions of judgment.
- Jurisdiction: Any legal action related to an MCA must be brought in Virginia.
However, there are exceptions. The law doesn’t apply to banks or credit unions, or to merchant cash advances over $500,000. This provides some protection for business owners, but there are still many pitfalls.
How We Can Help
Dealing with an MCA can get legally complicated, and that’s where we come in. Our experienced Virginia MCA defense lawyers can help you in several ways:
Reviewing the MCA Contract: We’ll make sure you understand all the terms and that everything complies with Virginia laws.
Negotiating the Agreement: An attorney can often negotiate better rates and terms than you could on your own.
Resolving Disputes: If you run into issues with payments or need to get out of the agreement, we can help resolve disputes.
Debt Settlement: If the MCA becomes unaffordable, we may be able to negotiate a settlement for less than you owe.
Lawsuits: In extreme cases, we can help defend you if the MCA company sues over the debt. Having experienced legal counsel on your side can provide huge peace of mind when dealing with merchant cash advances. We’ll make sure your rights are protected under Virginia laws.
Case Studies: Real-Life Examples
Let’s look at some hypothetical scenarios to illustrate how we can help:
Scenario 1: A small restaurant in Richmond took out an MCA to cover some urgent repairs. The daily payments quickly became unmanageable, and the restaurant owner was at risk of losing the business. We stepped in, reviewed the contract, and found several violations of Virginia’s MCA laws. We were able to negotiate a more manageable payment plan and ultimately settled the debt for less than the original amount.
Scenario 2: A retail store in Virginia Beach was sued by an MCA company for defaulting on payments. The store owner had signed a confession of judgment, which the MCA company was using to enforce the debt. We challenged the confession of judgment in court, arguing that it was prohibited under Virginia law. The court ruled in our favor, and the MCA company was forced to drop the lawsuit.
Alternatives to High-Cost Merchant Cash Advances
While MCAs are certainly an option for quick financing, it’s important to look at some lower-cost alternatives too:
Bank Loans: Talk to your bank or credit union about a term loan or business line of credit.
SBA Loans: The Small Business Administration offers various loan programs with favorable terms.
Invoice Financing: Use your outstanding invoices as collateral to get a cash advance.
Business Credit Cards: These can provide a flexible line of credit for short-term needs.
Conclusion
Merchant cash advances can be a lifeline for businesses in need of quick cash, but they come with significant risks. At Delancey Street, we’re committed to helping Virginia business owners navigate these challenges and protect their interests. If you’re dealing with an MCA issue, don’t hesitate to contact us for a consultation. We’re here to help you take control of your financial future and ensure your business thrives.