Close my business account to stop a mca merchant cash advance? If you are considering it, it is usually the worst way to get out of a merchant cash advance.
Some companies such as debt settlement companies recommend doing so as part of their settlement process. Business owners should know that intentionally closing your business checking account is considered a default by many merchant cash advance companies and lenders.
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The following is what many debt settlement companies tell customers to do.
- Sign a contract with the debt settlement company. The contract often allows the debt settlement company to represent your business in communications with lenders and mca merchant cash advance companies.
- Pay the debt settlement company to start the process.
- Close your business checking account per the instructions or advice of the debt settlement company
- Allow the debt settlement company to continue to represent you in settlement talks.
There are several problems and possible severe consequences to closing your business checking account to stop paying cash advances or loans and signing a contract with a debt settlement company.
- The lender can also consider this an intentional default or fraud.
- The lender or mca company can file a certificate of judgement and may also be able to debit funds in other accounts you may have at the same bank or other banks
- You may not be able to talk to the lenders or cash advance companies directly any more even if you want to. Language in the contract may not allow you to talk contact the funder directly
- You may not have influence over the final settlement agreement.
The contract you sign take power and decisions out of your hands and puts much of it in the hands of the debt settlement companies.
Other options and alternatives to contracting with debt settlement companies and closing your business checking account
- Contact the lenders directly and try to discuss your financial situation and reach an agreement with the lenders yourself.
- Payoff the merchant cash advances with other loans if the balances are low enough
- Discuss your financial situation with a business attorney
- Filing bankruptcy
The advantage of some of these options in general is that they either show you are sincerely trying to work with your lenders to settle your debt, are forming a coherent strategy to do so, or have officially determined that you cannot pay. These also have advantages over closing your account.
FAQ – Frequently asked questions.
Question: Why can’t I close my account? I don’t have the money. The merchant cash advance companies will overdraw my account. I have to close my account.
Answer: There are cases when the mca merchant cash advance companies or other lenders may overdraw your account too much and too severely in a few days. You may feel this is a reason you have to do something. This can be a very valid concern. Anticipate in advance your account being overdrawn.
You should know several days in advance that your account may be overdrawn. Look at alternatives. If it is too late and you know the daily payment will overdraw the account, consider contacting your bank and change your account to not pay any items that will overdraw the account.