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Ways for businesses to deal with default and face MCA collections

On Behalf of | Jul 4, 2024 | Merchant Cash Advances

A merchant cash advance (MCA) can be a lifeline for a small business needing quick access to capital. However, when repayment becomes challenging, the consequences can be severe.

If you are a business owner facing collection tactics, how can you face the situation of an MCA default? In addition, what legal avenues are available to protect your business?

Strategies against aggressive collection tactics

When your business defaults on an MCA, the lender may employ aggressive collection tactics, which could threaten the survival of your business. However, there are legal strategies you can use to navigate this challenging situation, such as:

  • Understanding your rights: First, it is crucial to understand your rights. Lenders cannot use abusive, unfair or deceptive practices to collect your MCA payment.
  • Challenging the MCA payment amount: If you believe the amount is not valid or the lender has made an error in the amount owed, you have the right to dispute it.
  • Negotiating a settlement: If your business is struggling to repay the MCA, you may consider negotiating a settlement with the lender. This could involve reducing the total amount owed or proposing a more manageable repayment plan.

Further, you may consider exploring alternative dispute resolution methods like arbitration or mediation before going to court. These processes can be less time-consuming and less expensive than litigation.

In arbitration, an arbitrator decides after hearing the arguments from both parties. On the other hand, a neutral third party helps facilitate a negotiation between you and the lender in mediation.

Protecting your rights and business

Facing an MCA default can seem like an overwhelming and insurmountable challenge. By seeking legal guidance, you may protect your rights as well as your business while you seek to enhance the resilience and longevity of your entrepreneurial journey.