Connecticut MCA Defense Lawyers

Understanding Merchant Cash Advances (MCAs) in Connecticut

You are small business owner in Connecticut, and you hearing about these things called Merchant Cash Advances. Maybe you thinking about getting one, or maybe you already got one and now you in trouble. Either way, we understand. MCAs can be confusing, and they can cause big problems. Let’s explain it for you.

What is Merchant Cash Advance?

What’s an MCA? It’s simple. An MCA is when company gives you money now, and you promise to pay them back with piece of your future sales. Sounds good, yes? But here’s the thing – MCAs are not loans. They are buying your future income. This means they can charge you much more than regular loan could.

In Connecticut, MCAs are legal, but they are not free to do whatever they want. There is new law called Commercial Finance Disclosure Law. It says MCA companies must tell you more about what you are getting into. And there has been some court cases too. In 2022, Connecticut Supreme Court said in Pearl Capital Rivis Ventures, LLC v. RDN Constr., Inc. that some MCAs might actually be loans. This is important news for business owners.

But here’s the important part – MCAs can be risky. They often cost much more than you think. We are talking interest rates that can be over 100% sometimes. That’s very high. And if you cannot pay, things can get bad quickly. So, now that you know what MCAs are, let’s talk about problems they can cause.

Common Legal Issues with MCAs

So you are thinking about getting MCA, or maybe you already have one. What kind of problems could you have? Let’s talk about it.

High Interest Rates and Factor Rates

First, there’s the interest rates. MCAs don’t call it interest, they call it “factor rate”. But it’s basically same thing. And it’s usually very high. We are talking APRs that can be over 100%. That’s much more than regular business loan would charge you. But high rates are just start of problems.

Confession of Judgment

Then there’s this thing called “confession of judgment”. Sounds scary, right? It is. When you sign this, you are saying MCA company can go to court and get judgment against you without even telling you first. In Connecticut, these are not as powerful as they used to be, but they can still cause you big problems. And it gets worse.