Business owners nationwide take out merchant cash advances (MCAs) because lenders offer quick access to capital. However, MCAs can come with extremely high interest rates and aggressive collection tactics.
Although an MCA is not a traditional loan as it is a transaction that involves a security interest, it is possible to apply strategies for debt negotiations when working toward an MCA settlement. Are you a business owner struggling to make MCA payments and wondering what areas to focus on in settlement talks with your lender?
Payment terms
You can negotiate a longer repayment period or a temporary reduction in payments. By negotiating more manageable payment terms, you may avoid default and reduce the risk of further collection actions.
Settlement amount
Another area of compromise is the settlement amount. You can negotiate a lump sum payment that is less than the full repayment amount. You should be prepared to make a strong case for why a reduced settlement amount is reasonable and provide documentation to support your claim.
Interest rates
In addition, you can negotiate a reduction in the interest rate or a waiver of accrued interest. This may reduce the amount you need to repay.
Confidentiality provisions
Further, you may be able to convince the lender to accept a settlement agreement if you agree to keep the terms of the settlement confidential. A lender may prefer to keep a settlement agreement private to avoid setting a precedent for other borrowers.
Developing a negotiation strategy
Navigating MCA settlement talks can be a complex and challenging process. As you worry about maintaining operations while managing MCA debts, seeking legal counsel may help you understand your rights and options. Additionally, having legal guidance may help you develop a negotiation strategy that considers the unique needs and circumstances of your business.