Colorado MCA Defense Lawyers Business Debt Relief

Running a small business comes with many financial challenges. When cash flow gets tight, business owners may turn to merchant cash advances (MCAs) or other high-interest financing options to keep their doors open. However, these products can quickly spiral out of control, leaving entrepreneurs struggling with overwhelming debt.If you own a Colorado small business saddled with MCA debt, know that you have options – including working with a business debt relief law firm to negotiate settlements or file defense lawsuits against predatory lenders. This guide covers key things Colorado business owners should understand about defending against MCA companies and other alternative lenders.

How MCA Loans Work

Merchant cash advances provide quick access to capital by essentially selling a business’s future credit card sales. An MCA company gives a business owner an upfront lump sum payment in exchange for the rights to collect a fixed percentage of daily credit card receipts until the balance has been repaid – plus very high interest rates and fees.

• The process is quick and easy because MCA companies generally don’t do much due diligence on the business or owner
• Approval decisions emphasize speed over loan quality or ability to repay
• Payback amounts are automatically withdrawn daily from credit card settlement accounts
• Effective interest rates typically range from 70% to well over 300% APR

This structure allows struggling enterprises to get short-term cash injections. However, the exceptionally high costs mean that business owners often end up owing far more than the original advance.

Why MCA Loans Can Be Predatory

Merchant cash advance loans seem straightforward on the surface. However, many Colorado small business owners report being misled about repayment terms or getting trapped in debt cycles they don’t understand.

• Lack of transparency – MCA contracts contain complex legal language that hides the true costs. And predatory providers may straight-up lie about rates and fees.
• Overreliance on limited data – Approval decisions emphasize speed over due diligence. Lenders fail to adequately assess the business’s finances.
• Ignoring total debt obligations – MCA companies don’t consider an applicant’s full debt load across other financing products. This pushes owners deeper into debt.
• Rushing due diligence – Lenders emphasize fast approvals over fully vetting the business and owner. This leads to uninformed lending decisions.
• Maximizing volume over quality – The MCA business model incentivizes writing as many loans as possible rather than carefully assessing risk and ability to repay.

While MCA loans provide fast access to capital for struggling enterprises, the above practices mean that many providers essentially set small business owners up to fail.

Common Legal Defenses Against MCA Lenders

If you own a Colorado business facing legal action from an MCA company or other predatory lender, working with an experienced small business defense lawyer gives you the best chance of avoiding judgements or negotiating favorable settlements.Defense strategies may include:

Unconscionability

• Argue that loan terms were unjustly one-sided or that the agreement itself was invalid due to deception
• Prove the contract involved procedural unconscionability (deception or duress in signing) and substantive unconscionability (unfair, overly harsh terms)

Usury Violations

• Allege violations of state laws capping maximum allowable interest rates
• Colorado usury laws generally limit rates to 45% APR on loans under $1,000

Racketeering

• Argue that lending practices constitute corrupt business activities under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act
• Allows private entities harmed by racketeering schemes to file civil suits

Fraudulent Inducement

• Claim the lender used intentional lies or omissions to trick the business into accepting loan terms it wouldn’t have otherwise agreed to

Finding the Right Business Debt Relief Lawyer

Defending a small business against an MCA company or other predatory lender can feel totally overwhelming. But you don’t have to go it alone. The expert Colorado small business lawyers at Delancey Street have extensive experience representing local entrepreneurs against high-cost lenders and negotiating debt relief. We offer dedicated support guiding business owners through the legal process.

Why Work With Us

• We focus exclusively on small business debt relief cases – including complex MCA defense litigation
• Our lawyers and support staff all have small business backgrounds themselves
• We understand the huge emotional, financial, and legal stress these situations cause entrepreneurs and their families
• Our debt settlement services provide experienced support negotiating agreements and restructuring payments
• We customize our approach based on your unique situation, finances, and risk tolerance
• Our simple intake process gets clients working with our legal team right away

If you own a Colorado small business struggling with overwhelming MCA debt or other predatory loans, contact our office today to discuss your situation confidentially and learn more about how we can help. Our dedicated team of small business debt relief experts empowers entrepreneurs to take control of their financial futures.

Frequently Asked Questions

What types of alternative business financing carry the highest risk of predatory lending practices?

• Merchant cash advances (MCAs)
• Business lines of credit
• Revenue-based financing
• Factoring
• Purchase order financing
• Commercial real estate loans
• Equipment financing loans
• Franchise loans

What are signs my business is dealing with a predatory lender?

• Exceptionally high interest rates and fees
• Pressure to sign complex contracts quickly without reviewing terms
• Lender doesn’t request enough documentation to responsibly assess credit risk
• Neglects to consider your total outstanding debt obligations
• Isn’t forthcoming about rates, fees, or key lending criteria

What legal defenses can Colorado small business owners assert against predatory MCA loans?

• Unconscionability – Argue the contract involved deception and unfair terms
• Usury law violations – Interest rates exceed maximums under CO usury statutes
• Racketeering – Allege corrupt lending practices under federal RICO laws
• Fraud – Claim you were intentionally misled about loan terms

What types of relief or damages can a successful MCA defense lawsuit seek?

• Invalidating the contract
• Reducing amount owed
• Lowering interest rates
• Obtaining monetary damages
• Stopping collections activities and judgements

How can a small business lawyer help me address overwhelming MCA debt?An experienced lawyer can assess your case, identify potential defenses, negotiate settlements, restructure payments, craft debt management plans, and provide litigation services. This takes the burden off struggling entrepreneurs so they can focus on running their business.