The merchant cash advance (MCA) industry provides funding to many small and medium-sized business owners who want to keep their companies afloat. However, in the face of an MCA default, the MCA renewal offer during negotiations can be a trap. Are you a business owner considering an MCA renewal offer during settlement talks and wondering if it is a good idea?
Why borrowers accept renewal offers
Borrowers may accept MCA renewal offers because they feel they have no other options. Lenders may also use high-pressure sales tactics to get borrowers to accept the offer. Therefore, it is essential for you to know some of the common dangers of an MCA renewal offer.
Increased debt obligations
One of the hidden dangers of an MCA renewal offer is increased debt obligations. When you accept a renewal offer, you may be required to pay more in total interest and fees over the life of the MCA. This can make it even harder for your business to become profitable.
Extended repayment terms
Another hidden danger is extended repayment terms. Renewal offers often come with longer repayment terms, which can last several years. This can make it difficult for your business to invest in growth or expansion.
Waiver of contractual rights
In addition, the waiver of contractual rights is another hidden danger. The renewal offer may require you to waive certain contractual rights or defenses, such as the right to notice of default or the right to cure a default. This can limit your ability to negotiate a settlement or seek relief under the contract.
Striving to get back on the path to financial stability
Before accepting an MCA renewal offer, it is crucial to check for hidden dangers to avoid making a decision that can lead to financial disaster. Seeking help from a legal advocate may help you review the terms of the offer and determine the most suitable course of action as you strive to get back on the path to financial stability.