Quick Answer: MCA loans can indeed sink businesses through their daily automatic withdrawals and high costs, as demonstrated by this business owner who accumulated $160k in debt across 5 loans over 60 months. These merchant cash advances are particularly dangerous because they stack easily and create unsustainable payment obligations that drain cash flow faster than businesses can recover.
Question:
Dear Steve,
We were trying to build our new business in real estate, while I hired more employees to work for the taxidermy company I’ve had for 20 years.
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We got into our slow season and I thought it wouldn’t hurt to take out a loan to keep us afloat well one thing led to another and now over 60 months I have 5 major loans two were supposed to be for consolidation and it just kept tacking more and more and more money onto the tab now I’m sitting at $160k worth of debt between loans, credit cards, and tax debt.
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I don’t know what I can do at this point but I just can’t afford the amount of money that’s being taken out automatically daily, weekly, and monthly.
How can I possibly get out of this with my business and life still intact without falling under more debt or prolonging the terms or having to get another loan trying to cover all of the others????
I’ve never been in this much debt and have no idea what to do and somehow I have never missed a payment but my well is dry I have no more options at all what do I do?? Any advice would be greatly appreciated.
Shawn
Answer:
Dear Shawn,
These situations are slow and insidious. At first, one loan seems to help and before long they pile up and you are buried.
It sounds like some of these loans are Merchant Cash Advance loans. These are very attractive and the companies promise easy payment terms. They will even take out the money from your bank account on a daily basis as you described.
Ironically, I was talking with my friend Damon Day recently about Merchant Cash Advance loans. Some of these lenders are very aggressive and take no prisoners. Damon was describing to me an attorney he knows that has had success in helping the Merchant Cash Advance companies to better understand the situation and settle or adjust the debt. So a call to Damon Day for more information might be a smart idea.
There are also companies out there that specialize in dealing with just Merchant Cash Advance loans like Corporate Turnaround. They submitted a guest post on “What to Do When You Can’t Afford to Pay Your Business Debt.”
I’m not sure what your real estate business is so it is not clear what impact a court-supervised debt reorganization might play.
It certainly sounds like you have distinctive debt issues that each have their own silos of expertise. You have debts to deal with from:
- Business Debt
- Credit Cards
- Merchant Cash Advance
- Tax Debt (Maybe business and personal)
When you add in the complexity of these issues being personal, business or a mixture of both then you have a situation that is not best dealt with by your average mass-market debt relief or isolated expert. You need a captain to drive this ship.
Ideally what you need to do is find an overall financial expert who can evaluate your situation, call in the right expert resources, and give you an overall plan of action to follow to get you to the other side of this. The best person I know who does this is Damon Day but that doesn’t mean there are not other people who are as adept in these complicated situations who can guide you through it. I just don’t know of them.
While an exact solution will require more information, what I do know for certain is there is a custom-crafted path through this mess. It might not be easy and it may take some time but not dealing with this is going to drag you down in all the worst ways.
It is time to start chipping away at a solution, implementing it, and moving forward or this will consume the next decade of your life in misery and struggle.
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