A Merchant Cash Advance is a type of small business funding that is not structured as a traditional loan. In theory, a Merchant Cash Advance provider purchases a specified dollar amount of a business’ future debit and credit card sales at a discount. In return, small businesses are supposed to receive funding and flexible repayment terms. But in practice, Merchant Cash Advance is probably one of the most predatory forms of lending in the country today. And because the industry only affects small businesses, it has completely escaped government oversight.
The Merchant Cash Advance Bait & Switch
With little to no competition from conventional banks when making loans to small businesses, Merchant Cash Advance companies can basically charge whatever they want. Despite phrasing their deals as involving “future receivables,” a standard deal that is offered to small businesses is to borrow a fixed sum such as $9,000 and pay back a fixed amount such as $120 a day for six months, or a total of $14,500. This is equivalent to an interest rate of 250 percent a year. That is ten times the legal limit in New York state where most of the companies are based and operate, and also of questionable legality in states like California as well. To get around the usury laws, Merchant Cash Advance companies argue that they aren’t actually charging interest but simply buying the money businesses will make in the future, at a discount. As long as nobody uses the word “loan,” the hope is that the transaction will hold up in court if challenged.
How a Merchant Cash Advance Lawsuit Attorney Can Help
The Jake A. Walton Law Firm believes in helping “the little guy” even if the little guy is a small business. We know how the Merchant Cash Advance industry operates based on our review of numerous contractual agreements as well as from being involved in litigation with the various companies that comprise the industry. If you are a small business based in California that is experiencing difficulties with a Merchant Cash Advance lender, do not make the mistake of thinking that you can ignore a lender that is threatening to take legal action. Protect your small business and contact The Jake A. Walton Law Firm. We are focused on merchant cash advance issues and would be happy to speak with you.