Merchant Cash Advance Debt Relief: 5 Questions About the Proposed Plan

When you’re struggling under debt from an MCA advance, getting a cash advance debt-relief plan may feel like your only option. Here’s a list of crucial questions you should ask before you sign up with anyone.

Ask These Five Questions

Lower monthly payments sound enticing, but they only address one part of what you are agreeing to. To make sure you understand and agree with the full story, ask these five questions, in writing:

• (1) What are you buying?
• (2) Where is my money going?
• (3) What is the total cost?
• (4) What happens if I stop paying the funders?
• (5) How does the company handle any lawsuit if one comes?

Getting them in writing protects you, by making sure you get the right answer from the right person, and holding the company to what they said.

”MCA debt relief” is just a marketing label. Some services negotiate reduced payoffs, others a new payment schedule, others new financing or reverse consolidation. Ask which. They all call themselves “relief”, but don’t all offer the same service.

The relief plan may not send 100% of your payments to your funders. Ask for an accounting of each dollar you send in. The statement will show where your dollars were spent. It should list every deposit you made to the account; each fee the company took from it and what it was for; every payment they sent to a funder, and who got it; money still held by the company, and any limits on when you can get it back; and any settlement installments still due to be paid, and who will pay them, if they become due. A good way to double-check this is to hold it up to the bank and funder records. Any discrepancies must be explained to your satisfaction before you pay another cent.

Just holding money aside for a possible settlement does not necessarily stop MCA funders from doing their thing. A good accounting answers two questions: (1) where did this money go, and (2) what MCA obligations actually changed because of those payments?

Relief plans may get your funders off your back today, but at what cost? A promise to reduce what funders demand doesn’t mean that’s all you pay for the program. Get this in writing: how fees are computed; exactly what services you will receive and when; when fees fall due; and what you owe them if the program stops or settles fewer MCAs than it first promised to. Also, beware promises of “reduced fees” and “savings” without specifying amounts. Warning signs are when deductions are made with no explanation, or charges that don’t match what the agreement called for, or the program’s refusal to give an accounting of its own.

Compare offers by adding what the funders want, and what the relief program charges, to be sure you can afford it. Especially, find out how much is left unpaid from funders you still owe, and how they expect you to handle that. Bad deals still look good if they are compared to nothing at all.

On fees, the federal FTC Telemarketing Sales Rule bans charging advance fees for debt relief services. Since 2024, it also outlaws false or misleading statements in business-to-business telemarketing calls. If someone forgives part of a debt, the forgiven part is generally taxable income and should be reported even without a Form 1099-C, unless an exclusion like bankruptcy or insolvency applies. Build that in to the cost of the relief program.

Joining a Relief Program Doesn’t Amend Your MCA

Find out: What happens if you fail to pay the funders while you’re making payments to the new program? Some services may advise reducing payments, ceasing them, or sending them elsewhere. The lender may see that as a default and begin suing or trying to collect. Joining a relief program doesn’t amend your MCA or suspend its right to enforce. Before considering any change to your MCA repayment schedule, have someone who is familiar with merchant cash advance contracts review all of the agreements and all of the letters from the plan, and weigh that against your intended business strategy. Also ask what happens if a funder won’t agree, or continues to collect despite the re-payment proposal.

A funder may send notices to your customers or card processor, telling them to pay your funder. The UCC rules control that. Those notices are not the same document as the agreement you signed or their financing statement, and what they actually do depends on the rules that govern them. Don’t count on the federal Fair Debt Collection Practices Act, either. Debts for business purposes are not covered, and your merchant cash advance is generally a business debt.

How the relief company expects a lawsuit to be handled, and what actually happens, may be two different things. Ask what they will do if a lawsuit comes, and who will pay for that. Keep a complete copy of everything you got, and write down when and how it came. Settlement talks do not reset any legal deadline. Note on your calendar when any response has to be in. If you are not sure of that, or who the lawsuit named as a party, get a lawyer’s confirmation.

Independent Review

Whether the plan failed is not automatically proved if you get sued or offered an unfavorable deal, or hear from the funder’s lawyers. Funders differ. But those things could be a sign it is time to check the contract to make sure the plan is doing what they told you it would. You may need an independent review if:

• the funders all agreed, the plan told you, but can’t prove it;
• you can’t reconcile your own records of withdrawals with their accounting of where your money went;
• a court deadline is coming but no lawyer in the plan is responsible for meeting it;
• the plan tells you an MCA has been “resolved” or “paid off” without showing you the proof;
• you were pushed into another financing agreement;
• the plan missed an update schedule;
• or any combination of these things.

Before considering a new company, get a complete set of program paperwork: agreements, fee statements, letters and emails, receipts, a statement of all deposits you made and all money still held; and write a record of each MCA you signed, the balance claimed by the funder, what payments are credited to it, is there a settlement offer pending, and what installments, if any, are still due on it. Also check whether there is a lawsuit now or expected. Not all installments are fully paid just because a dispute was settled. Releases, dismissals or UCC terminations may come only after payments, or other conditions, are met. Before cancelling, check notices sent, fees already owed, funds they are still holding, upcoming payments. Switching providers doesn’t automatically cancel a valid settlement.

Reviews and “best company” lists help you think of questions to ask, not choose for you. Get any answer you like checked in the written agreement. There’s also no rule you must join or have been sued, or missed a payment, to get an outside review. You don’t have to make up your mind today.