Debt Settlement Company: Meaning in a Merchant Cash Advance
A debt settlement company is a firm that negotiates with a business's creditors, including MCA funders, to reduce or restructure what the business owes, usually for a fee based on the debt enrolled or the savings achieved.
What does debt settlement company mean?
When MCA payments become unmanageable, some owners hire a settlement company. It typically tells the business to stop paying funders, then negotiates reduced payoffs. Some work alongside attorneys, and some are law firms. Results vary a lot, and fees can be large.
Why does debt settlement company matter to your business?
Stopping payments is usually a default under an MCA contract. That can trigger acceleration, default fees, lawsuits and, in some states, a judgment against the business and guarantor before the settlement company reaches a deal. Some owners come out ahead. Others end up with lawsuits, frozen accounts and a fee on top.
What should you ask before signing with one?
- What exactly is your fee, and when is it charged?
- Will you tell me to stop paying my funders?
- Is an attorney involved, and in which state are they licensed?
- What happens if a funder sues before a settlement?
Which alternatives should you check first?
Reconciliation, a payment modification or a consolidation sometimes solves the same problem without a default. Talk to your funders and a business attorney before you sign a settlement contract.
How do you check a firm's record?
Search the company's name with your state attorney general's office and in court records. A pattern of complaints or lawsuits from past clients is worth knowing before you hand over any fee.
Where will you see it?
In ads aimed at owners with several advances. In calls from companies that found your UCC filings. In contracts that describe fees as a share of debt enrolled or savings achieved.
Which terms are related to debt settlement company?
The full list is in the glossary. Owners ask about this in Who is the actual funder on my MCA offer?.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.