Merchant Cash Advance Contracts

In the Merchant Cash Advance (“MCA”) space lenders should be extremely cautious as to the syntax that governs their Merchant Agreement. Due to MCA’s notoriously high default rates compared to traditional loans, the burden falls upon the MCA company – also known as the Secured Party – to ensure the language of their Merchant Agreement adequately protects their best interests. It is insufficient for a Merchant Agreement to include only the minimum required elements that allow a contract to be valid. The agreement must also entail specific provisions that successfully grant a security interest in all assets being sought as collateral under the agreement. It is imperative to incorporate these provisions as a prescription within the agreement to assure successful pursuit in the secured collateral in the forsaken event that a merchant defaults on the agreement.

We have seen how a Merchant Agreement’s exclusion of these provisions hindered the efficacy retrieving our client’s security interest in future credit card receivables from the merchant’s processing accounts. The payment-processing world is a complex system, one that MCA companies should conceptually understand, but not re-engineer to ensure the safety from events arising out of a breach/default. We have more than a decade worth of experience within the payment-processing world. As a result, we have created and maintained relationships with the key processing and banking players shaping the industry, in addition to wholesale Independent Sales Organizations. Through these relationships we have seen the payment-processing world evolve to its current state. Therefore, we understand the measures these companies are taking to protect themselves and their customers from MCA companies successfully pursuing their secured interests under the Merchant Agreement.

Let us give you the reassurance that your contracts are up to date with the current standards being sought by the players in the payment-processing world. We understand the intricacies involved and have the inside information that will keep you safe from situations that arise out of defaults. There are multiple solutions that we employ to give our clients the peace of mind when a default occurs. Don’t let your company become a victim to this every day occurrence.

– Adam Puchi, Legal Apprentice, Global Legal Law Firm