Since the merchant cash advance industry lack regulation, businesses are able to take out several cash advances at the same time. In many cases, one cash advance is mostly likely extremely taxing on the bottom line of the business. The high rates and short repayment term can easily lead to financial distress and even push you into filing bankruptcy.
In a brief analysis on the repayment structure, consider that each cash advance company will be paid back by taking percentage of your credit card sales. If there two cash advance companies taking up to 20% each from your credit card sales, you’ll only end up with 60% of your sales as revenue for other financial obligations. In order to keep up, you might have take out a third advance leaving you with only 40% of credit card sales as revenue.
This can very rapidly spiral out of control and may ultimately lead to you filing bankruptcy. If you have found yourself in this unfortunate position, it is important to understand that there are options available to you.
If you a business owner who prefers avoiding bankruptcy, you may enter into debt settlement talks or debt negotiation with your lenders. Debt settlement is a process whereby a debtor offers to settle the amount allegedly owed – usually at a substantially lower amount than what is owed. It is recommended to hire the services of an experienced business debt relief lawyer if you prefer to pursue the debt settlement route as lenders can very ruthless. Debt negotiation is an alternate debt relief strategy in which the terms of your merchant cash advance agreement to make payments more affordable. If your situation is so dire, you may file a Chapter 11 bankruptcy that will give you an opportunity to restructure your payments. A Chapter 11 bankruptcy is a long and complex legal undertaking. Having the proper legal representation is crucial, especially if you have signed a Confession of Judgment and a Personal Guarantee.