Quick Answer: Merchant Cash Advances can be negotiated and settled, especially when presenting legitimate business hardship like reduced trucking revenue. A good restructuring firm should negotiate settlements for $1,000-$3,000 monthly per $100,000 in debt, but avoid companies requiring large upfront fees.
Question:
Dear Charles,
I own a trucking company for last 4 years and was doing ok until I got Merchant Cash Advances. I was paying them off on regular basis but my business suffered in the last couple of months that has put me in a situation where I can’t pay these MCAs anymore.
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My question is how can I settle with them or can you recommend any debt settlement company that can help me do that.
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Hirs
Answer:
Dear Hirs,
Merchant Cash Advances of all types can be negotiated. Payments and principal can be reduced.
The key is presenting legitimate hardship, [which it appears to be your case, due to a slow-down in business] and a realistic budget that you can afford on a monthly basis going forward. It also helps that you had been paying them off in good faith and later ran into trouble.
There is a very good chance that your lenders will offer you a “breather” or reduced payments for a while but, even though the offer might sound good, we find that the relief offered is seldom really helpful. You need a solution, not a 4-8 week reduction in payments. And look out for debt settlement companies that want anything more than a minimal fee up front. A good restructuring firm should be able to start negotiating on a budget of as little as 1-3,000 dollars per month [ for every 100,000 in debt you have ].
As you have found out, or are about to find out, Merchant Cash Advance companies will go to extraordinary lengths to collect, after all, they lent the money, so they want it back with interest; that’s their business. Their collection tactics are sophisticated and start with the contract[s], which give them the ability to go after all sorts of assets [ including receivables ] and often include a COJ, or “confession of judgment”. A COJ allows the lender to literally skip the lawsuit phase and go right after your bank account[s] in the event of default. But COJ’s are negotiable too. Note: If you are sued, it is always a best practice to have an attorney “answer” the lawsuit.
As a trucking company, you really need to get very specific advice as to the vulnerability of your revenue streams. For example, if you deliver for Fed-X, that is a “receivable”. They can attempt to attach monies Fed-X was going to pay you, and they very well may succeed, which could, in turn, make Fed-X wary of doing business with you. It’s the same thing if you deliver food to a Super Market.
This is the “Achilles Heel” for you and why you’ll need good advice from negotiators experienced in the trucking industry.
Charles
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