Merchant Cash Advance (MCA) Debt Settlement
In 2007-08, a new source of capital was created for small businesses, the Merchant Cash Advance. Banks stopped lending to the small business arena for a host of reasons, and there was simply no availability of capital. Small businesses starved for lack of a borrowing option.
The merchant cash advance filled this enormous void. The concept is technically not a loan, but a purchase of future receivables and does not have to meet the strict regulations traditional lenders are required to follow.
The merchant cash advance is a new idea with new parameters:
- A cash advance is made available virtually overnight, 48 hours at the most.
- Underwriting consists of demonstrating what a month’s average deposits are and is accessible to the borrower as an immediate cash injection.
Easy, fast money, but the payback can be unsupportable:
- Daily withdrawals from your credit card processing account or operational account.
- 30-40% interest.
- Very short amortizations – usually six months.
- Daily withdrawals can become enormous.
- Confession of judgments are signed in advance and frequently entered in court.
- Often co-signer guarantors were required.
Because a merchant cash advance is not technically a loan, but an advance against future receivables, there are no regulations, no rules and no safeguards to protect the business. Usury laws are not applicable.
When a borrowing business begins to default, a common story plays out, as the borrower will be offered another merchant cash advance from either the original company or another merchant cash advance company who is willing to lend. This second cash advance allows the business to continue to pay the first cash advance and making cash available for daily withdrawals for the second cash advance.
This is called stacking that can assault the small business’s cash flow, forcing them into massive default and business failure depriving them of operating cash as income is directed to paying two, three or more advances.
Enter Second Wind Consultants
Not long after the rise of the merchant cash advance, we were assailed by an onslaught of defaulting small businesses unable to withstand the pressure of these unaffordable and enormous daily withdrawals.
We approached the lenders with traditional workout strategies only to find that these new lenders were not acting like traditional banks. They were driven to get their money, and interest paid and typically had Confession of Judgments in hand when collecting. With no regulations, Confession of Judgments in hand and personal guaranties to support the payback, they were challenging adversaries.
It did not take long for us to figure out how to deal with them and we found the solution to working out these unsupportable advances.
- We stop the daily withdrawals immediately.
- We negotiate a settlement of up to 30-40% of the money advanced (the settlement amount depends upon the circumstances of the borrower) and it takes 3 to 4 months.
- We work with the business to set aside a settlement amount to be saved over a reasonable amount of time. When ready we pay the merchant cash advance off 30-40% of the remaining debt with releases on the business and personal guaranty.
- The Confession of Judgment, if filed, gets released and marked settled.
These are challenging relationships, but in the end, the lenders will settle on our terms as described.
There are billions of dollars in play in this arena, and many thousands of businesses are forced into failure as the payback becomes too much to support.
Second Wind Consultants offers a business trapped in this situation an alternative option and an affordable way out of this debt circle.
Contact us and stop the daily withdrawals. Help is available.
Call 413-584-2581 extension #1 to set up a consultation today.
We can help you with any Merchant Cash Advance company you have debt with including:
CAN Capital debt
Knight Capital debt
Swift Capital debt
Strategic Funding debt
Pearl Capital debt