Pay day is just around the corner and as a business owner, you know that
your people need to get their wages. However, your clients have been slow
to pay this month and you’re out of cash reserves in the bank. This
is a pretty common stress when you’re a small business owner, and
debts can quickly pile up even further, leaving you wondering where to
turn or how you’re going to stay afloat.
This is the type of person that
merchant cash advance loans target and appeal to. A merchant cash advance (MCA) sounds simple on principle:
the company gives you a sizeable sum, sometimes even as high as $100,000
or more, and gets it to you sometimes in as little as 24 to 48 hours.
In return, you agree to pay the principal (and a premium charge) off in
installments over a duration of a few months, which can usually be done
fairly quickly if you are able to recover the sums owed from slow paying clients.
However, what you quickly find out is that the cash advance actually carries
a large premium, and high daily or weekly payments over a relatively short
duration of time. You’re stuck making your payments seemingly endlessly
while hardly chipping away at the principal on your balance. Suddenly
an advance that was only supposed to have held you over for a few weeks
is actually compounding your initial cashflow issues.
This is the vicious cycle with cash advance loans, and many companies are
in business to make money off your business. The advances are structured in a way that keeps many businesses perpetually
in debt so the revenue and profit keep rolling in, all the while your
business continues to tread water.
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If you want to get away from this vicious cycle of cash advance loans and
business debts, there are a few things you can do, which we’ll discuss here.
Consider a Term Loan
If you have good credit, refinancing these debts with a longer-term loan,
lower interest rate loan can be a good move. These loans may last longer,
but have better monthly payments that won’t break the bank and place
more stress on your business’s financial picture. If you have good
credit, rates can go as low as 6%, and usually at the most rates are around
30%, which is still reasonable when you consider many of these temporary
cash-advance loan companies can have interest rates as high as 50% or more.
If your credit score is at least 600, you have no outstanding tax liens
or bankruptcies, you’ve been profitable for at least one of the
last two years, and can supply two years of tax returns, you should look
into one of these term loans where you have a much better control over
the interest rate.
Consider a High-Rate Monthly Loan
We get it: when running a business, sometimes you need to make decisions
that may hamper your credit in order to stay afloat. If your credit isn’t
all that great, you aren’t resigned to dealing with an MCA lender
just yet. Instead, some lenders will offer high-rate monthly payment loans.
Yes, having a higher interest rate can be costly, but these loans could
save you a substantial amount of money in comparison to a merchant cash
advance, especially if you’re able to pay extra on your loan and
have no pre-payment penalties. In fact, a high-rate loan that’s
paid off quickly can save you tens of thousands of dollars and help you
build up your credit again.
Did you know you that sometime business debts that are in default status
can be re-negotiated? Whether it’s with a merchant cash advance,
an ACH loan, or even credit card debt, you may be able to negotiate the
outstanding balance down and pay only a portion of what you actually owe.
However, you should avoid default wherever possible, and if you see hardship
coming, contact your lender to see if they will reduce your payments to
keep you out of default. Before defaulting, get familiar with the terms
of your agreement, as your company may be subject to UCC liense, recovery
of security collateral, confessions of judgment, and default may trigger
a personal guaranty.
It’s best to make sure you have a qualified negotiator on your side
though, such as our New York
business loan lawyers. That way you can make sure your business’s interests are looked
after by someone who is familiar with the laws and your rights as a borrower.
Do you need help with your business’s outstanding cash advances and
Call a New York debt relief attorney from the Law Office of Simon Goldenberg, PLLC today at (347) 389-0245!