New York Business Debt Settlement Attorneys

Debt Settlement Options

All major financial decisions have pros and cons and businesses must consult qualified professionals. Continue reading to learn more about debt settlement options for businesses and how an attorney can help.

Merchant Cash Advances (MCAs)

A merchant cash advance (MCA) is a type of business funding that provides quick access to working capital. It is an alternative to traditional bank loans and is based on a percentage of future credit cards or other receivables. With an MCA, businesses receive a lump sum payment in exchange for agreeing to repay the lender with a portion of their future sales. This type of financing can be beneficial for small businesses that need quick access to funds but may not qualify for traditional loans due to poor credit or lack of collateral.

The eligibility criteria for an MCA vary from lender to lender but generally include terms related to the length of the agreement and a set amount of monthly sales processed through debit and credit cards. The repayment schedule is typically flexible and based on the amount of money received from customers via debit or credit card transactions. The application process is usually straightforward and can be completed online depending on one's circumstances. Factors that influence approval include the business's credit score, annual revenue, and time in business.

Merchant cash advances can be especially helpful for seasonal businesses or those with unstable cash flow who need fast access to funds without having to go through the lengthy process required by traditional lenders. However, it is important to note that merchant cash advances tend to have higher interest rates than traditional loans, so borrowers should carefully consider all their options before opting for this financial solution.

These loans tend to be very favorable to businesses who have a reduced cash flow and are in immediate need of a renegotiation in order to better reflect their current financial situation. Businesses, however, should be aware that defaulting on these loans gives the creditors a lot of triggers to force the business owner to pay (including UCC liens, freezing of bank accounts, etc.). For this reason, having a skilled professional guiding you through the reconciliation process is so important.

When aggressive creditors enforce account restraints, liens, or levies, you need immediate legal action. Our firm steps in to seek expedited court relief to protect your operational accounts. Furthermore, attorney-led settlement can reduce total debt and ease daily cash-flow burdens. For example, in a matter involving a $30,000 MCA balance with daily debits totaling over $7,200 per month, we negotiated the debt down to $15,000 (a 50% reduction) and restructured payments to $1,600 per month, reducing the client's monthly cash-flow strain by nearly 78%.

Since August 2023, New York has also required most non-bank merchant cash advance providers to give businesses a standardized disclosure of the total cost and an annualized rate before funding is finalized, under the state's Commercial Finance Disclosure Law. If your MCA agreement was not accompanied by this disclosure, that is worth flagging to your attorney.

Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a loan program designed to provide financial support to small businesses affected by the COVID-19 pandemic. The primary purpose of these loans is to help businesses maintain their workforce and cover essential operational expenses during times of economic uncertainty. Eligible businesses include those with 500 or fewer employees, including non-profits, self-employed individuals, and independent contractors.

PPP loans can be used for payroll costs, rent, utilities, and interest on mortgage obligations, helping businesses sustain their operations amidst the crisis. The program was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020, aiming to protect small business owners and their employees from the devastating impacts of the pandemic.

A key feature of PPP loans is their potential for forgiveness, which means that borrowers may not have to repay the loan if they meet specific criteria. To qualify for forgiveness, businesses must use at least 60% of the loan proceeds for payroll costs and maintain employee headcount and compensation levels during the covered period. PPP loans come with a low-interest rate of 1% and a maturity of five years for any unforgiven portion.

The Paycheck Protection Program closed to new applications on May 31, 2021, and no new PPP loans are being issued. What remains active today are forgiveness reviews, SBA audits, and repayment disputes on loans issued in 2020 and 2021. If your business has an unresolved forgiveness application, a denial, or a repayment demand, that dispute is handled through your lender or the SBA directly, using documentation that supports your original payroll and headcount certifications.