Can You Go to Jail for Not Paying an MCA?
No. Not paying a merchant cash advance is a broken contract, which is a civil matter. The funder can sue, get a judgment and collect, but it can't have you arrested for owing money. The exception is fraud: lying about the business, faking bank statements or hiding deposits on purpose can be a crime. Threats of jail from a collector are a red flag, so write down who said it and when.
What can actually happen if you stop paying?
- A lawsuit and a judgment.
- Collection on the judgment, like a bank levy.
- A claim under your personal guarantee.
- Notices to your customers under the funder's UCC lien.
When does criminal law come into it?
Federal wire fraud law covers schemes to get money by false statements sent electronically. Sending a funder altered statements is the kind of thing that can cross that line. Slow sales never do. This is general information, not legal advice. For your contract and your state, talk to a business lawyer.
What should you do if a collector threatens you?
- Stay calm and ask for the threat in writing. Most collectors won't put it in an email.
- Write down the name, company, phone number and time of every call.
- Ask for the balance, the contract and any court papers in writing.
- Keep paying what you can under the contract, or request reconciliation in writing if sales fell.
A threat of arrest over a business debt is a sign to talk to a lawyer and to keep every message.
Should you save the threats?
Yes. Keep every voicemail, text and email, and write down the date, time and caller's name for each call. A clear record helps your lawyer and any regulator you report to. Check your state's recording rules before you record a live call.
What should you ask the funder?
- What exactly do you say I did wrong?
- Can you put that in writing?
- Will you consider reconciliation or a restructure?
- Who's your compliance contact?
Where can you check your own numbers?
The short version is in the Legal FAQ. To check the numbers on your own advance, use the MCA payment calculator.
Where do these facts come from?
Want a second look at your advance?
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.