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Virginia Beach MCA Defense Lawyers Business Debt Relief

If you run a small business in Virginia Beach and are struggling with debt, you may be considering business debt relief options. Merchant cash advances (MCAs) are a common form of financing for small businesses, but they can also lead to spiraling debt if not managed properly. This article provides an overview of MCAs, potential legal defenses against predatory lending practices, and business debt relief options in Virginia Beach.

Understanding Merchant Cash Advances

A merchant cash advance (MCA) is a form of financing where a lender provides a business with a lump sum of cash in exchange for a percentage of future credit card and debit card sales. It is not technically considered a loan under Virginia law.Here’s how it works:

• You get an upfront sum of cash, usually between $5,000-$500,000
• The MCA company takes a fixed percentage of your daily credit/debit card sales – usually between 8-20%
• You pay back the advance as a percentage of sales until it’s fully paid off
• There’s no set repayment schedule – the amount due fluctuates based on your sales volume

MCAs appeal to small business owners because:

• Fast approval decisions and funding in as little as 24-48 hours
• Fewer eligibility requirements than bank loans
• No collateral required
• Payments tied to sales means more flexibility

However, MCAs also come with risks, such as:

• Extremely high effective interest rates often exceeding 100% APR
• Daily payments can drain cash flow quickly if sales drop
• Vague contract terms and conditions
• Potentially predatory lending practices

Legal Defenses Against Predatory MCA Lending

While MCAs are less regulated than conventional loans, small business owners do have legal defenses in certain situations:Unconscionable ContractsIf an MCA agreement contains unfair terms that unreasonably favor the lender, it may be considered an “unconscionable contract” under Virginia law. This makes the contract void or gives grounds for legal remedies.Factors considered in determining unconscionability include:

• Deception or high-pressure tactics to get the business owner to sign
• Unreasonably high interest rates/fees
• Confusing or ambiguous contract terms

Usury ViolationsVirginia has usury laws limiting the maximum legal interest rate to 12% per year. MCA companies get around this by structuring advances as cash flow purchases rather than loans. However, in practice they often impose extremely high equivalent interest rates.A business attorney can review the MCA agreement to determine if it violates Virginia’s usury laws based on the effective interest rate.Breach of ContractIf an MCA company violates terms spelled out in the agreement – such as manipulating the repayment percentage or schedule without contractual grounds to do so – this constitutes breach of contract.Other ViolationsDepending on the specifics of the MCA arrangement, violations may also include:

• Fraudulent misrepresentation
• RICO Act violations
• Truth in Lending Act (TILA) violations

Working With a Virginia Beach Business Attorney

If you feel an MCA company is engaged in predatory practices against your Virginia Beach business, contact a local business attorney as soon as possible.An attorney can review your merchant cash advance agreement and business records to build a legal case based on unconscionability, usury violations, breach of contract, or other grounds. They may also negotiate with the MCA company to reach a settlement.Options a Virginia Beach business lawyer may pursue include:

• Negotiating a lump sum settlement for less than you owe
• Having the MCA agreement invalidated by proving unlawful lending practices
• Filing suit against the MCA company to recover damages
• Helping restructure business finances and cash flow

It’s important to act quickly if you suspect unlawful behavior, before the situation escalates. The sooner you speak with a legal professional, the more leverage you’ll have.

Alternative Virginia Beach Business Debt Relief Options

If you realize an MCA was a poor financing decision for your Virginia Beach small business, there are alternative forms of potential debt relief:Debt Consolidation LoanBanks, credit unions and online lenders offer debt consolidation loans allowing you to roll multiple debts into one loan with fixed payments. This simplifies payments and often lowers the interest rate.Business Debt SettlementDebt settlement companies like Delancey Street negotiate with your creditors to settle business debts for less than you owe. While settling debts does impact your business credit score, it can eliminate debt quickly.Chapter 11 BankruptcyFiling for Chapter 11 bankruptcy stops collections and foreclosures while a repayment plan is developed. A business attorney can advise if this makes sense for your situation.Out-of-Court SettlementBefore resorting to legal action, some MCA companies may negotiate an out-of-court settlement. A business attorney can assist in these negotiations.The key is acting quickly to address cash flow issues and seek the appropriate form of debt relief before the situation spirals out of control.

Call Delancey Street Today!

If you have merchant cash advance debt threatening the future of your Virginia Beach small business, the dedicated experts at Delancey Street can help. Call (212) 210-1851 to speak with a business debt relief specialist today.