As a Florida business owner struggling with cash flow, a merchant cash advance can be tempting. This type of business financing is easy to qualify for and can get you cash to spend within just one to two business days. However, Florida merchant cash advances are extremely expensive and have the potential to do more harm than good for the business
If that sounds familiar, know there is help out there. A Florida merchant cash advance attorney can assist you in resolving the issues you face with your merchant cash advance and specifically threats, of litigation or actual litigation filed against you due to default of your MCA.
How Does a Merchant Cash Advance (MCA) Work?
Sometimes known as a credit card processing loan, merchant cash advances aren’t technically loans. Instead of receiving a lump sum loan from a lender that you pay back in fixed installments over several years, an MCA gives you money upfront in exchange for a cut of your future sales, plus fees. That means as your sales increase or decrease, so do your payments. Payments get debited directly from your business bank account daily or weekly. The repayment period is often a lot shorter than typical business loans — around three to 18 months.
Sometimes, merchant cash advance companies may require fixed weekly payments instead, based on your estimated monthly revenue. This may be the case for businesses that don’t rely heavily on credit card sales.
Merchant Cash Advance funders also charge what’s known as a factor rate, rather than a typical interest rate. Factor rates range from about 1.1 to 1.5, depending on the expected performance of your business. The riskier your company, the higher the rate. To calculate how much an MCA will ultimately cost, multiply the amount borrowed by the factor rate. So if your MCA is for $40,000 and your factor rate is 1.3, you’d pay a total of $52,000 ($12,000 in fees).
Are merchant cash advances legal in Florida?
Understanding Florida MCA Laws
Some merchants in Florida have complained that MCAs are essentially loans in disguise, and should be subject to the state’s usury law. (That’s a law that prevents lenders from charging excessively high interest rates on loans.)
Some states are very clear in their laws regarding what constitutes a loan versus the purchase and sale of receivables. But Florida has historically been less authoritative. However, in January 2021, a Florida appellate court held that a merchant cash advance is, in fact a purchase and sale agreement and not a “disguised loan.” Therefore, MCA companies are not subject to Florida’s criminal usury statute.
That means Florida MCA funders can continue to charge factor rates that are as high as 350% or more when expressed as an annual percentage rate. This makes it easy to get trapped in a cycle of debt. Especially when high MCA payments significantly reduce cash flow and your ability to manage the business as a result.
But there is another important Florida law that dictates when an MCA is subject to usury statutes. If the merchant has to pay back their advance unconditionally — as in, no matter what — it’s actually considered a loan. In that case, the MCA lender can’t charge excessively high fees. Otherwise, they’d be committing criminal usury.
With a true merchant cash advance, the funder is buying future receivables. But only if the business is capable of producing those receivables. If there are adverse business conditions (which the merchant can’t control) that cause a Florida-based business to lose money, the lender may have to accept that loss or try to sue the business and business owner in Court.
Signs You Need a Florida Merchant Cash Advance Attorney
If you owe MCA debt and are struggling to pay it back, you might benefit from the help of an attorney. Here are a few signs you need legal assistance:
- A large portion of your Florida business revenue goes toward MCA payments.
- Your MCA contract includes a Confession of Judgment (COJ).
- You’re receiving calls and tons of messages from debt collectors or solicitors about MCA debt help.
- You made a personal guarantee for your merchant cash advance.
- There is a UCC filed against your Florida business.
- Your business or personal bank accounts are frozen.
- MCA lenders have contacted your clients or vendors.
How Can Tayne Law Help With Florida MCA Debt?
If you’re struggling with MCA debt in Florida, we can help. Tayne Law’s headquarters are in New York, but we provide legal assistance to clients all over the country — and even the world. Our process is simple and straightforward. Plus, our merchant cash advance attorneys can work with you on personalized solutions that not only get rid of burdensome merchant cash advances and other business debt, but also work to help protect the ongoing cash flow of the business throughout the process.
Tayne Law Group earned the ‘Best Debt Consolidation Service’ for 9 years running. The Better Business Bureau gives us an A+ rating.
Here’s how our services work:
- Start by scheduling a free phone consultation. We’ll spend this time talking about your situation, learning about your business and any debt you might have. After getting to know you, we can provide a cost for services and explain our no-billing policy.
- Submit your first payment. When you decide to work with us, you can make your first payment and we get started right away working on your file. At this point, we’ll take over all communications with your creditors and keep in mind all work is done by our office and is never outsourced to third parties who don’t know you or your business.
- We’ll begin negotiations. We will reach out to your creditors and let them know that you want to resolve your debt. Our debt relief attorneys know how to negotiate. They will work with your creditors and their legal teams to get you the best deal possible to relieve you of the debt.
- You’ll be in the loop. We’ll give you updates as we work with your creditors on a final resolution and have an ongoing open door policy so you can call anytime for updates. In the meantime, you’ll have the breathing room to focus on keeping your business running.
If your business is struggling with MCA debt — or any other debt — you might not know where to turn or who to trust for help. Know that Tayne Law Group, P.C. is here for you. Our team of experienced debt relief attorneys can help you get your business back on track and out of debt for good. Call us for a free consultation at 866-890-7337 or fill out our short contact form. All conversations are confidential, and we will never share or sell your information.