Is closing your business checking account to stop an mca cash advance a good idea?
It a bad idea for most businesses and the worst way to get out of a merchant cash advance. Consider better alternatives & apply below.
Lenders consider closing an account an intentional default.
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FAQ frequently asked questions on closing a business checking account to stop mca cash advance payments
Can I close my business checking account to stop a cash advance daily debit?
Closing your account is not allowed and may be considered an intentional default. Call the cash advance company and try to work out a solution. Look at alternatives when the mca company will not give you any repayment plan you can pay.
What will the cash advance company do if I close my account without telling them?
It can be called an intentional default and you can be sued. The cash advance company is much more likely to take legal action against you and your business through a lawsuit filed in state court in the county your business is located in. There could be accusations of fraud if an intentional default is claimed by the mca company.
What are better options?
Working with the advance company to negotiate a lower payment is almost always better than closing the account. That should only be seen as a possible last option under extreme circumstances. In many cases, the bank has called the loan due and you must come to a negotiated solution with the lender to avoid a default.
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 sometime after your have missed mca payments.
- 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.