Business Debt Relief

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What is Business Debt Relief?


Business debt relief is the process of freeing up cash flow for businesses cash strapped by high interest business loans. Typically, merchant cash advances are the biggest culprit for killing cash flow. This is because merchant cash advances are very short term, high interest purchase agreements. Merchant cash advances aren’t, in the technical sense, loans. They are purchase agreements of future revenue.


They are also set up on daily, or best-case scenario, weekly payments. This is a brutal financial situation for a business who has multiple MCAs and is experiencing a downturn in revenue. Luckily, there are some factors that can stack the deck in your favor when it comes to getting payment relief from merchant advances.

How Does the Process Work?


A business debt relief program uses the unique structure of a merchant advance contract to your advantage. Since merchant advances are not technically loans, they must consist of a reconciliation clause to avoid being considered illegal loans. The reconciliation clause states that the merchant lender is contractually obligated to restructure your agreement in the case of a downturn in revenue. A good business debt restructuring company’s job is to build the case with your MCA lenders that your revenue is, in fact, down. This is done by providing proof based on a company’s profit and loss statement, as well as recorded revenue through the business’s bank statements.

What if a Business Doesn’t Have a Downturn in Revenue?


In such cases, restructuring can still be an effective path to getting payment reduction. Maybe your revenue isn’t down per say, but you could still be experiencing an operational cash flow shortage. In these instances, the leverage you have when restructuring will largely be based on what the MCA companies can place a lien on. For instance, if a large portion of your revenue is made through credit card processing, this can take some leverage away from you. MCA companies can lock up credit card processing. This is not full proof leverage for the lenders, though. You may have multiple positions and the credit card sales are only enough to partially satisfy the payment for the first position. This takes away leverage from your second position and so on. In this case, it is most important to come to an agreement with the first position. Then the second, and so on, will more easily follow suit.