Merchant Cash Advances (MCAs) can provide quick funding for small businesses in need of capital. However, the high fees, aggressive repayment terms, and daily deductions can quickly turn an MCA into a financial nightmare. If you’re trapped in a bad MCA, you may wonder if there’s a way out. The good news is that legal options exist—and consulting a Merchant Cash Advance lawyer could be your first step toward financial relief.
Understanding the Problem with MCAs
Unlike traditional loans, MCAs are structured as advances against future sales, often with factor rates that translate into sky-high APRs. Lenders withdraw a fixed percentage of your daily revenue until the advance is repaid, which can cripple cash flow. Worse, many MCA contracts include confessions of judgment (COJs), allowing lenders to seize assets without notice if you default.
If you’re struggling with unaffordable payments, hidden fees, or deceptive lending practices, you’re not powerless. Legal strategies may help you renegotiate or even terminate your MCA agreement.
Legal Options to Escape a Bad MCA
- Challenge the Contract’s Enforceability
Many MCA agreements contain predatory terms that may be legally questionable. A skilled attorney can review your contract for:
- Unconscionable terms– Excessively harsh conditions that no reasonable lender would impose.
- Usury violations– Some states cap interest rates, and MCAs exceeding those limits may be unenforceable.
- Fraud or misrepresentation– If the lender misled you about repayment terms, the contract could be voidable.
If your agreement is found to be unfair or illegal, a court may invalidate it—freeing you from the debt.
- Negotiate a Settlement or Restructured Payment Plan
Lenders often prefer settling rather than risking a lengthy legal battle. An attorney can help you negotiate:
- A lump-sum settlement for less than what you owe.
- Reduced daily payment percentages to ease cash flow strain.
- Extended repayment terms to lower immediate financial pressure.
- File for Bankruptcy (As a Last Resort)
While bankruptcy isn’t ideal, Chapter 11 (for businesses) or Chapter 13 (for individuals) may discharge or reorganize MCA debt. However, MCAs are sometimes classified as “future receivables purchases” rather than loans, making them harder to discharge. A lawyer can assess whether bankruptcy is a viable option.
- Fight Confessions of Judgment (COJs)
Many MCA lenders include COJs in contracts, allowing them to freeze your accounts without a court hearing. If you’ve been hit with a COJ, an attorney can:
- Challenge its validity in court.
- Argue that the lender misused the COJ (e.g., by accelerating repayment unfairly).
- Seek injunctive relief to halt collections while disputing the debt.
How to Protect Yourself Moving Forward
If you’ve escaped a bad MCA, take steps to avoid repeating the same mistake:
- Explore alternative financing(SBA loans, lines of credit, or invoice factoring).
- Read contracts carefully—avoid signing anything with a confession of judgment.
- Consult a lawyer before signing—an attorney can spot predatory terms early.
When to Seek Legal Help
If an MCA is draining your business’s finances, don’t wait until it’s too late. A payday loan attorney can help you explore defenses, negotiate with lenders, or even litigate if necessary. The sooner you act, the more options you may have.
Final Thoughts: How Grant Phillips Law Can Help
Escaping a predatory MCA requires strategic legal action. Whether you need to challenge unfair contract terms, fight a confession of judgment, or negotiate a settlement, having an experienced advocate can make all the difference. If you’re struggling with an unmanageable cash advance, consider reaching out to Grant Phillips Law for a consultation. Their expertise in merchant cash advance disputes can help you regain control of your business’s financial future.
