Merchant cash advance debt relief

A merchant cash advance gives your business a lump sum now. In return, the funder buys a fixed amount of your future sales at a discount, and collects it by debiting your bank account or taking a share of card sales until the full amount is paid.

Most MCA contracts call this a purchase of receivables, not a loan. Sales of receivables fall under Article 9 of the UCC (Cornell LII, opens in a new tab), which is why funders file liens. Whether a contract is truly a sale or a loan in disguise depends on its terms and your state's law.

Stacking means taking a second advance, and often a third, while the first is still being repaid. It usually starts when the first set of debits leaves too little cash for payroll or rent, and another funder offers quick money.

Each advance brings its own debit, so a business can end up paying several funders every single day. Much of the new money goes straight back out to the older advances, and the cash gap grows instead of closing.

Because an MCA is sold as a share of future sales, many contracts include a reconciliation clause. It lets you ask the funder to adjust the fixed debit so it matches what your sales actually are, usually by sending bank statements.

If sales have dropped, a reconciliation request is often the first thing to try. Read the clause closely: it may set deadlines, require specific documents or give the funder a set time to answer. Keep copies of everything you send.

Defaults in MCA contracts are often about what you do, not only what you fail to pay. Read the default section of every contract before you change how the business banks or sells.

After a default, a contract may let the funder demand the whole remaining amount at once, add fees, enforce a personal guarantee and write to your customers. That last step is a UCC 9-406 notice, and it can cut off incoming cash quickly.

A confession of judgment is a signed statement, often part of the MCA paperwork, in which the business and its owner agree in advance that the funder can get a court judgment without a lawsuit. The FTC has described funders using them to get an uncontested judgment right away (FTC, opens in a new tab) after an alleged default.

Many were filed in New York against owners who lived elsewhere. In 2019 New York amended CPLR 3218 (New York State Senate, opens in a new tab) so a confession filed after the change can be entered only in the New York county where the defendant lived, which closed its courts to this use against out-of-state owners.

Other states set their own rules, and some still allow them. One MCA owner was permanently banned from the industry (FTC, opens in a new tab) after using them to seize assets.

Negotiation starts with the numbers: what the business takes in, what it must spend to stay open, and what is left for the funders. With that on paper, there are a few realistic asks, and each funder answers for itself.

Clear Financial Company negotiates with funders on the business's behalf and helps you plan what the business can afford while talks go on. We do not lend money, sell advances or give legal advice. It is one part of business debt relief.

Some situations need a business attorney first: a lawsuit, a judgment, a frozen account, or a question about whether a contract can be enforced at all. An attorney can raise legal defenses that a negotiator cannot.