Running a business with merchant cash advance (MCA) debt can feel overwhelming, especially when daily or weekly payments start affecting your cash flow. Perhaps you’ve reached a point where maintaining these payments has become unsustainable, or maybe your business circumstances have changed significantly since taking the advance. Exploring settlement options can help you resolve your obligations in a way that allows your business to move forward.
Working with a lawyer to contact the MCA company is often the first step. Once both parties agree to explore a settlement, you’ll need to navigate the terms of a settlement agreement. At this state, two critical questions often arise: “What’s the total settlement amount?” and “How will I need to pay it?”
A brief guide to MCA settlement amounts
The settlement amount is what you agree to pay to clear your MCA debt. Usually, this amount is less than your total balance. Several factors may come into play when deciding this amount, such as your original advance, your payment history and your current business situation. Market conditions and your contract terms might also play a role in reaching this number.
Two types of payment structures often come up:
- Lump sum settlements: This refers to a one-time payment for the entire settled amount, which usually results in a more significant discount. However, this option requires careful planning since you must pay within set dates. Most MCA companies will require proof of funds before finalizing a lump sum settlement agreement.
- Installment payment plans: Instead of paying all at once, you can break your settlement into smaller payments. While this makes payments more manageable, the total cost might be higher. Your agreement will show when each payment is due. Most MCA companies require automatic bank payments to ensure you don’t miss any deadlines.
It’s crucial to check the payment details in your agreement – how much you’ll pay, when it’s due and how you can pay. Make sure you understand what happens if you miss a payment or break the agreement’s rules. Having a lawyer review these terms can help protect you from any hidden issues. It is also important to keep payment confirmations and get a final satisfaction letter once you’ve completed all payments.
Get the clarity you need
Settlement amounts and terms can significantly impact your business’s financial future. Talk to an attorney to have a clear understanding of your situation and your options.