As a business owner, you are well aware that running a business requires a significant amount of cash flow. From working capital to get your business off the ground, sufficient funding is crucial. Dealing with external factors such as seasonal changes and a fluctuating economy may result in you seeking a merchant cash advance or loan. This alternative form of funding is favored by small businesses simply because it much easier to obtain than a traditional business loan. However, defaulting on your merchant cash advance loan can be detrimental to the financial health of your business.
Defaulting On Your Merchant Cash Advance Loan: Acceleration Clause & Personal Guarantee
If you default on your merchant cash advance, your lender has the option of pursuing legal action against you. Many merchant cash advance agreements include a personal guarantee. This personal guarantee may allow the lender to legally require your personal finances to cover your business debt. In combination with an acceleration clause in the merchant cash advance, the full lump sum may become due if the borrower defaults. It is important to have a lawyer to represent you if that’s the case.
Defaulting On Your Merchant Cash Advance: Confession of Judgment
Many lenders may adjust your terms of payment when you demonstrate difficulty keeping up with your merchant cash advance payments. However, they may require you to sign a Confession of judgment. Signing the Confession of Judgment agreement may result in the funding company can seeking entry of judgment without having to prove the necessary elements in the underlying case putting the personal guarantor at greater risk.
Defaulting On Your Merchant Cash Advance: Debt Collectors
Defaulting on your Merchant Cash Advance Loans can cripple the finances of your company very quickly. Interest rates, penalties, collection costs, miscellaneous fees as well as a declining credit score can make you feel like filing bankruptcy is your only option. Debt collectors are ruthless when it comes to seeking relief on outstanding debt. Our business debt relief lawyers will take the burden of dealing with debt collectors and creditors off of your shoulders.
Defaulting On Your Merchant Cash Advance: Your Options
Although filing a Chapter 11 bankruptcy may give you an opportunity to restructure your company, there are other options available to you. Speak to our attorneys about settling your merchant cash advance loan or reducing your business loan.