Running a business is challenging, especially when cash flow runs thin. Merchant cash advances (MCAs) might seem like a quick fix – fast cash to keep the lights on. However, if you end up unable to make the payments, you could face harsh collection tactics that threaten the future of your enterprise.
MCAs provide immediate funds, but the trade-off can be steep. They typically have high fees and oppressive repayment schedules that can quickly overwhelm any struggling enterprise. If your business is unable keep up with these payments, the situation can turn dire, fast.
Unethical collection practices
Unfortunately, some MCA lenders use aggressive and unethical tactics to get their money back. The Federal Trade Commission has even stepped in, recently issuing a permanent ban against an unscrupulous MCA company that engaged in predatory lending and collection tactics.
It’s crucial to know what these predatory tactics look like. They might include:
- Harassment: Repeatedly calling you, your family, your business or your employees
- False threats: Claiming they’ll report you to law enforcement or take other action that isn’t within the bounds of acceptable collections practices
- Deception: Lying or misleading you about the terms of the advance
- Intimidation: Issuing threats – whether explicit or implicit – against you, your family or your employees
- Unauthorized withdrawals: Taking money directly from your accounts without permission
Such tactics often indicate deeper wrongdoing. The MCA lender may not have been upfront about the terms of the deal or the real cost of the cash advance. They may have violated the law in numerous ways.
For that reason, it’s critical to protect yourself and your business by seeking legal guidance. You may have multiple options for defending against the debt and exposing illegal practices.