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Can a Merchant Cash Advance lender take money from my bank account?

On Behalf of | Mar 12, 2024 | Merchant Cash Advances

Perhaps supply chain issues are slowing down business or a worker shortage is making it difficult to meet your financial targets or maybe things are going really well, and you just need a bit more cash to get the supplies you need to meet a growing demand. Whatever the reason for quickly accessible cash, more and more business owners are finding themselves turning to Merchant Cash Advance (MCA) lenders to meet their financial needs.

Although there are benefits to these loans, including the relatively quick turn around from a request for funding to getting the cash, the risks can be high. One potential risk: the lender reaching directly into your bank accounts to satisfy repayment.

Can MCA lenders take money directly from my accounts?

In short, the answer is maybe. Like all things in the legal world, it can get a bit murky. The full reach of the MCA lender is generally guided by the terms of the contract. This is why it is important for business owners to carefully review these documents and make sure they understand the full impact of each provision with careful attention to information on repayment.

The MCA generally uses one of two methods to achieve repayment:

  1. Percentage daily sales. This first option involves the MCA getting a fixed percentage of daily sales, often involving a direct connection to the company your business uses for credit card processing services.
  2. Withdrawals. In this option, the MCA lender will estimate your monthly revenue and take a portion directly from your bank account.

Unfortunately, there are unscrupulous actors within the MCA market. Business owners have reported lenders taking withdrawals that are well above the agreed upon rate and using violent threats when asked for repayment.

If you believe that an MCA lender is not following their end of the bargain, know that you have rights. You can fight back.

Although an MCA is not technically a loan and thus not subject to the same level of regulation, there are still rules that MCA lenders must abide by. These include following the terms of the agreed upon contract. If you believe that an MCA lender is not following these rules an attorney experienced in this niche area of the law can review your case and discuss options, fighting to better ensure that your rights are protected when dealing with unscrupulous actors.