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Merchant Cash Advance Specialist

The reason to get a Merchant Cash Advance specialist has to do with the wording of the contract. MCAs are written as the purchase of future receivables, which lets funders avoid usury laws. But courts may call it a loan if the repayment is fixed regardless of sales, and a generalist lawyer might not catch that.

California gives Merchant Cash Advance defense lawyers some good tools to use. SB 1235 changed the rules for Merchant Cash Advance lenders in California. They now have to give specific numbers in writing before you sign (total cost, estimated APR, payment amounts and dates, fees). If they skip that part, the contract may be voidable. Plus, the Rosenthal Act got a boost from SB 1286 and now covers commercial debts too. If a collector calls before 8 AM or after 9 PM, that could violate state law and be used to hammer a better deal.

Confession of judgment clauses are the gnarliest things in merchant cash advance contracts. They let funders collect on a judgment without ever going to trial. California’s Code of Civil Procedure 1132 effectively bans confession of judgment for California businesses though. So, out-of-state funders often try going to New York courts first and then bringing the judgment to California. An experienced lawyer can move to vacate those sister-state judgments.

If your bank account gets blocked, that is a clear sign to call a specialist. Another is multiple funders taking daily debits at the same time, leaving you too little cash to pay other bills. A UCC lien on your assets or a UCC 9-406 notice telling your customers to pay the funder can also be points when you want a specialist looking at the contract and your defenses.

If a funder threatens to seize equipment without a court order, that is generally unlawful in most California jurisdictions, but small business owners often just comply out of fear. Know your rights. If you get a summons or lawsuit, respond correctly and fast. Ignoring a summons won’t make it go away. In California, a creditor generally has four years to sue on a written contract. Talk to a lawyer sooner than later.

A Merchant Cash Advance lawyer starts with a sharp audit of the contract to check if it was a loan after all, if there are any unconscionable terms, if the funder gave proper SB 1235 disclosures before the contract was signed. If business income dropped, request a reconciliation under the contract to lower daily payments and buy time.

In California, most of these disputes end in a settlement rather than a judgment. Skilled lawyers can negotiate payoff discounts that slash the balance owed by 30% to 60% in many situations. One creditor case can settle in 30 to 90 days. Complications, such as lawsuits or multiple funders, can stretch the timeline out to six months or longer though.

When the MCA doesn’t settle, your lawyer should be prepared to use default defense motions, to move to vacate confessions of judgment, to challenge personal guarantees, and to seek injunctions stopping collection entirely. A firm that only negotiates isn’t much of a threat, and funders know that. Ask: Will you defend me in court if the funder sues? Or do you only negotiate?

Debt settlement companies are not the same as lawyer-led MCA defense firms. Settlers typically use a ‘stall and save’ approach. You stop paying the funder and save cash in the meantime. After several months of accumulating, they try to buy out the funders in lump-sum deals. Meanwhile they charge you a monthly fee. During that time, funders often sue, get UCC liens, collect judgments and may even contact your customers. A dedicated Merchant Cash Advance defense law firm takes action immediately, sends Rosenthal Act violation notices if applicable, and negotiates from a position of legal authority.

If you’re vetting a California lawyer, first run their name through the State Bar of California’s Attorney Search. It will show if their license is active and what discipline they may have. Also, lawyer referral services that are certified by the State Bar must meet certain standards and the State Bar takes complaints about them. Next, ask how many California Merchant Cash Advance cases they have closed. Ask for references from other owners who faced similar situations. Reviews and case studies are helpful, but getting people on the phone is even better.

Evaluating MCA lawyer fees? First ask whether they charge an upfront enrollment fee or audit fee. Second, inquire about their success fee. Determine if the fees align with your desired outcome. In California, for fees and costs over $1,000 (non-contingency), a written signed fee agreement is mandatory by law, but not if you’re a corporation. However, incorporated businesses should still request such an agreement to ensure clarity and alignment.

Business Bankruptcy

When a settlement still comes up short, or if you just want a total reset, the next option is business bankruptcy. Your business bankruptcy (likely Chapter 7 or 11) does not automatically erase a personal guarantee. The funder could still pursue you as a guarantor. Also, you may need a personal bankruptcy filing to completely free yourself from liability. But Subchapter V, the small-business Chapter 11, only works if total debts are $3,424,000 or less. And the federal fee to file Chapter 11 is $1,738.

The IRS generally treats forgiven debts like income. You report it on your tax return unless an exclusion like insolvency applies. If a funder writes off debt, they may send a 1099-C if it cancels $600 or more. Look into this with a CPA.

Don’t wait until a funder sues you. California has good laws protecting small business owners, but you need a lawyer who knows how to use them.