When you stop paying your merchant cash advance loans, a lawsuit will be filed soon after. Your merchant's cash advance funder will seek a monetary judgment against you and your company through the use of the court system. A default on a payday loan can result in bank overdraft charges, collection calls, damage to your credit ratings, a day in court, and the garnishment of your paycheck. The consequences of breaching your merchant cash advance agreement can be serious.
Small business lenders often include a provision known as a Confession of Judgment in these agreements and may also require you to sign a personal guarantee. This means that both your business and personal assets will be at risk. The best way to protect yourself if you run the risk of not paying a cash advance is to check Reconcile My MCA to ask them to change the percentage of their MCA. To default is not to repay a loan according to the terms agreed in the promissory note.
Failure to pay the cash advance to your merchant can have serious consequences. Because small business owners often have to sign the Confession of Judgment and personal guarantee in MCA agreements, your business could be in danger if you don't pay. What Happens When You Don't Pay an MCA Loan? The answer to that question depends on several factors, such as the terms of the agreement and the size of the merchant's cash advance. MCAs belong to a category of their own, so they are not governed by the same laws as other small business loans.
Merchant cash advances are purchase contracts between companies and suppliers, in which the supplier receives a share of the company's future revenue. If you find it difficult to repay a cash advance, the payment plan can be modified if the MCA contains a reconciliation clause. If a breach occurs, it can be considered a breach of contract and the supplier can file a lawsuit. In addition, the merchant cash advance service provider may use the confession of judgment clause to restrict your bank account.
Replacing your merchant cash advance debt with a term loan is one way to refinance your cash advance debt Exhaust all other options you have, including selling items or borrowing from a friend or family member before applying for a payday loan to avoid the potential consequences of not repaying a payday loan. According to another study, 50% of payday loan borrowers fail to repay a payday loan within two years of obtaining the first loan.