Are you struggling with a merchant cash advance in San Antonio? Maybe you’ve stacked multiple MCAs hoping to stay afloat, but now your cash flow is crushed by the daily debits. At DelanceyStreet Debt Relief, we understand how that debt is toxic, and the monthly payments can quickly drown you in debt—especially if you’re behind on payments and fearing lawsuits. Understanding the Business Debt Landscape can show why these problems arise, and how you might resolve them using legal strategies rooted in Texas law.
A Closer Look at MCAs in Texas
Many business owners assume an MCA is a standard loan, but in other cases, this might not be enough. Sometimes, you have to consider business debt negotiation and business debt settlement. Merchant cash advances are frequently marketed as “purchases of future receivables.” That matters, because Texas usury laws don’t automatically apply if the transaction isn’t labeled a “loan.” MCA providers can argue that they’re factoring invoices rather than issuing high-interest credit. If you find yourself behind on payments, the MCA company might swiftly initiate legal action under the Texas Business & Commerce Code or relevant sections of the Uniform Commercial Code (UCC). Sometimes, they rely on specific clauses in your contract—like confessions of judgment (COJs)—which let them get judgments against you without traditional court proceedings.
Many business owners accrue business debt, because they were hoping to grow; or perhaps they needed a life line. If your sales dipped unexpectedly, and you missed a few daily payments, the MCA provider might claim you breached the agreement. Now your business bank account might face huge financial issues for you business wise, and personally. This resulted in strained relationships with creditors and vendors. This is where the difference between a true factoring contract and a disguised high-interest loan can become a central argument in your defense.
Potential Consequences and Defenses
Failing to address MCA debt can lead to a default judgment, aggressive collection tactics, and even personal liability. But enrolling in a program like ours means you’re creating a way to avoid going out of business. Here’s how some of our clients defend themselves and find relief:
- Revisiting the Terms of the MCA
Many times, the MCA might actually be a disguised loan. If the daily payments are fixed, and there’s little relationship to your actual receivables, your attorney might argue the MCA’s structure violates Texas usury statutes. Achieving successful debt negotiation, and settlement, isn’t easy, but challenging the agreement’s validity can stall collection efforts and create leverage in negotiations. - Negotiating a Payment Plan
Most MCA providers don’t want you to file bankruptcy. They’d rather get paid something than nothing. By sharing updated bank statements, cash flow projections, and P/L statements, you can ask to reduce your daily payment or overall balance. Open communication can lead lenders to set up a payment plan where the payments are adjusted so that your business doesn’t suffer, stop collection phone calls, and keep your business going. - Exploring Debt Consolidation
If you can qualify, rolling multiple MCAs and other obligations into a single, structured loan can simplify your finances. You’ll have one monthly payment, potentially at a lower interest rate. It’s not a cure-all if your credit is already damaged, but it’s a path that has worked for many business owners looking for a reset. - Considering a Settlement
In some cases, you might settle the debt for less than the full amount owed—especially if you make a lump sum payment. It’s a strategy that appeals to certain MCA providers who realize they risk getting nothing if your business closes. Remember, though, forgiven debt can be taxed as income (see 26 U.S. Code § 61(a)(12)). If you manage a substantial settlement, consult a tax professional so you don’t fail to make your minimum payments, and incur a chronic pattern of late payments. - Assessing Bankruptcy Options
Filing under Chapter 7 or Chapter 11 in Texas can give you many tell tale signs that demonstrate you’re a candidate for business debt relief. Chapter 7 wipes out certain debts but may lead to the liquidation of your assets. Chapter 11 might let you reorganize and keep the doors open. While bankruptcy is a serious move, often, there are many tell tale signs that demonstrate you’re a candidate for business debt relief. Just be aware of the legal fees, court oversight, and credit ramifications.
Practical Case Scenarios
Scenario A: A local trucking company took two MCAs to help pay back its debt. Sales slowed, and the owner started missing daily remittances. The MCA provider filed a lawsuit, threatening to garnish the owner’s personal bank account. With DelanceyStreet, the owner provided proof of declining revenue and expenses. We negotiated a reduced weekly payment, gained a 20% discount on the total owed, and prevented a lien on personal assets. The trucking company stayed operational, preserving jobs.
Scenario B: A retail store in San Antonio discovered that the MCA agreement it signed allowed the provider to debit funds even if sales dipped below a set threshold. When the store couldn’t pay, the MCA company claimed a breach of contract, ignoring the fact that the daily debits exceeded the store’s actual receivables. An attorney examined the MCA’s terms, argued it functioned like a high-interest loan, and leveraged potential usury claims to force a settlement.
Detailed Strategies in One Snapshot
| Strategy | What It Entails | Pros | Cons |
|---|---|---|---|
| Revisiting the MCA Terms | Challenging the agreement if it’s essentially a disguised loan | Possible usury defense, can stall collections | Proof can be complex, requires skilled legal analysis |
| Negotiating a Payment Plan | Sharing financials to get reduced payments or extended terms | Avoids litigation, lets you keep operating | MCA provider may demand extra fees or collateral |
| Debt Consolidation | Securing one structured loan to pay off multiple MCAs | Single payment, possibly lower interest rate | Credit requirements can be strict; might not fix deeper financial issues |
| Settlement | Offering a lump sum that’s less than total owed | Quick resolution, can free up cash flow | Forgiven debt may be taxable, requires immediate funds to settle |
| Bankruptcy (7 or 11) | Filing for court protection if debt is unmanageable | Can wipe out or reorganize debt, halts lawsuits | Legal costs, credit impact, possible asset liquidation |
Tax Implications and Other Considerations
If you settle or restructure your MCA debt, you could face a tax bill on the forgiven portion—unless you qualify for certain exemptions. We always suggest consulting a CPA or tax attorney when negotiating significant debt reductions. Another point to remember is that many MCAs include personal guarantees. If you’re not careful, you might be personally liable for your business debt, risking personal assets and even your family’s financial security.
We’ve also worked with businesses that opted to liquidate non-essential assets to pay down their MCA. Selling off old equipment, extra inventory, or unused real estate can provide a lump sum that reduces the debt quickly and keeps litigation at bay. For some, invoice factoring can be an alternative if they have large outstanding invoices from reliable customers. That immediate cash infusion can help pay the MCA, stopping or slowing the practice of stacking merchant cash advance loans that can quickly sink a business.
DelanceyStreet’s Role in Your MCA Defense
We’re owned by an attorney, Steven Raiser, which means we can bring legal insight to the table, plus we have a sister law firm available if litigation becomes unavoidable. Our approach is straightforward:
- Open Communication with your MCA provider. We let them know you’re willing to find a solution.
- Financial Data to support your negotiation. We rely on your P/L statements, bank statements, and real-time cash flow.
- Customized Strategies. In some cases, it’s possible… However you may want to work with a company that understands how lenders work, especially when it comes to MCAs. We look at ways to reduce your total balance, extend terms, or consolidate debt—and we consider how each option affects your day-to-day operations.
Ultimately, we aim to protect your business from default and personal liability. If we can reach a settlement without the courts, that’s great. If not, we stand by you, whether that means contesting the MCA’s validity, defending a lawsuit, or helping you transition to bankruptcy if there’s no other way.