What is Merchant Cash Debt Relief?
Every business owner knows the pain of having to service Merchant Cash Advance debt that is destroying profitability and wreaking havoc on cash flow. MCA debt relief looks like this:
- Daily or weekly automatic bank withdrawals stop
- Credit card processing withdrawals stop
- Harassing and abusive phone conversations with MCA debt collectors stop
- Surmounting fees and penalties stop
- Fear of litigation and legal threats stop
- A clear process to eliminate most of the MCA debt and getting back to focusing on your business begins
How MCA Debt Relief Works
In recent years we have seen a proliferation of business debt workout companies, Merchant Cash Advance relief attorneys, debt solution lawyers, business debt settlement attorneys, and MCA debt restructuring companies who promise to solve your MCA debt issues. You hire them with the intent of having an expert handle your case and remove the burden of trying to figure out how to handle the situation. After all, you went into business to make money doing what you love – not to deal with the headaches of MCA debt. But what many of these business owners find is that they have just traded one set of problems for another.
The new “solution” company may be difficult to communicate with, unresponsive to calls and emails, and simply looking to collect a large upfront fee with no real relief in sight. Or, the monthly retainer you have to pay becomes too difficult to meet and you are left dealing with the MCAs again and they are not happy you spent money on a company that did not resolve the situation.
Some of the companies may help you and solve things eventually but you will not know how the process works. It’s the unknowns that can generate the most anxiety. We created the online business debt settlement course to give business owners a process to gain control of their debt issues and learn everything about settling MCA and every other kind of business debt they may be confronting. It is self-paced and each phase of the program moves you closer to a reduced settlement without spending hours per week trying to figure out where to get the next payment or arguing with your creditors. Instead, you will gain the expertise in debt negotiation and settlement to calmly navigate what might have seemed an impossible scenario.
The MCA Debt Relief Process
What Happens When You Default on a Merchant Cash Advance?
- If you default on a merchant cash advance, the lender will probably file a lawsuit.
- If you don’t respond to the lawsuit within 20 to 30 days, a default judgment will likely be entered against you and your business.
- Once a judgment has been entered, the MCA lender can attempt to seize assets, levy bank accounts, contact your customers, etc.
- Lenders may also try to freeze personal and business banking accounts or interfere with payroll relationships.
That all sounds scary, but nothing—not even a lawsuit or judgment against you—will prevent you from successfully creating a reduced settlement agreement with MCA lenders.
Protect your cash flow
- Don’t get tricked into making monthly payments or good-faith payments to your creditors. They will use this against you and still go after your accounts if they can find them. Make payments to your escrow savings account used for an agreed settlement instead.
- Payment arrangements should be made only if your frozen account is absolutely crucial to your business or if it’s a settlement for a small fraction of the balance.
- If a payment arrangement is reached to unfreeze your bank account, you can switch bank accounts after one or two payments. You must know how to create a safe banking solution.
- Always round up or round down lump-sum settlement offers
- Send the same offer continuously, even when the creditor asks you to stop
- It takes nine months on average to settle a debt (five months to build up escrow and four months from the time you make the first offer).
- A 15%-30% settlement of the debt is doable and is the goal unless the creditor has frozen your bank account or is holding receivables.
- Send an amended offer every five months that’s an increase or decrease by 5%-10%
- Reinforce offers with hardship documentation such as your most recent bank statements, updated hardship letter, and any other additional hardship documentation.
- Raise an offer a third time only if the creditor made a counteroffer no more than 30% – 40% of the balance. Wait at least five months between amended offers.
- The older/smaller the debt, the higher the likelihood of a quick and favorable settlement.
- If you no longer own the company that the debt is with, a settlement will likely be quick and favorable
MCA Settlement Procedures
There are very specific steps to finalizing a settlement. When a settlement amount agreement is made with an MCA company you must follow a procedure to ensure that you never expose yourself to further harm or do anything that will blow up the deal. If you use our settlement course you will likely realize a heavily reduced settlement amount that the MCA will accept. Clients of ours have settled for 10%, 15%, and an average of 30% of the owed amount. So, you will want to complete the settlement without incident and leave the MCA behind you forever.
Non-Negotiable Settlement Terms
- Settlement amount (Once the creditor has accepted your offer the creditor cannot demand a higher amount).
- Due date (The settlement due date must be far out enough for you to be able to remit the payment on time).
- All legal filing against you and your business must be terminated by the creditor.
- The settlement agreement must be signed by the creditor prior to any funds being sent. The creditor must sign it first. DocuSign is acceptable.
- Form of payment from a bank of your choice (It must be a protected bank account) – (ACH or Wire).
Sending Settlement Funds to the Creditor
- Do not send money without the creditor having signed a settlement agreement.
- Have the settlement agreement’s due date be at least one to two weeks out so you don’t miss it. Send the funds early.
- Always keep the receipt of the sent settlement funds and a record of your communications with the creditor.
- Send settlement funds via wire or ACH from a personal checking account designated specifically for settlements.
- Your creditor may require you to pay the debt in full if you miss the due date on a payment arrangement and you will have to start all over again.
The Hardship Letter
The hardship letter is your secret weapon and along with redacted bank statements make up the main arsenal that convinces MCA creditors to accept a reduced settlement offer.
1. The ABCs of a Hardship Letter:
- First paragraph: Introduce yourself and your situation, as well as show willingness to work with the creditor on resolving your debt.
- Second paragraph: Financial hardship data and additional hardship info such as life events and circumstances.
- Third paragraph: What you have done to resolve the debt so far and what to expect.
- Fourth paragraph: How the creditor can help resolve this situation and why you are not expecting it to improve.
2. Hardship Letter Guide
- Create customized Hardship Letters for each creditor in order to keep certain information about other creditors private.
- Keep the hardship letter one page long and to the point.
- Include financial data if it helps your cause. (How much you’ve paid to the creditor so far, the amount your revenue has been reduced by, total debt amount, overdue bills/invoices, etc.) Include the date your hardship began.
The business settlement course takes you through everything you need to settle your debt.