Does Merchant Cash Advance Debt Relief Hurt Your Credit?

Merchant cash advance debt relief can affect credit, and the effect depends on whose credit and on what happens along the way. Business credit reports can show the funder’s UCC filing, a balance resolved for less than the full amount where a funder reports it, and any judgment entered before an agreement is reached. Personal credit is usually untouched by the advance itself, but the personal guarantee most owners signed is the bridge that can carry a business debt to the owner. None of this is a reason to hide from the question. The useful comparison is not relief against a clean record; it is relief against the record the business is already building if the drafts keep failing.

Does a merchant cash advance show up on credit at all?

On business credit reports, the most visible trace is usually the funder’s UCC-1 financing statement, a public filing that business credit bureaus commonly collect as a public record. Many funders do not report routine payment history to credit bureaus at all, so an advance paid on time may leave little trace beyond the filing.

On the owner’s personal credit report, the advance itself usually does not appear, because it is a business obligation. The application may have included a credit check on the owner, which can show as an inquiry. The personal guarantee is what can change that picture later.

How can debt relief affect business credit?

In three main ways. Where a funder reports to business credit bureaus, a balance resolved for less than the full amount can be reported that way. While positions are being renegotiated, a funder may still declare a default, collect, or sue, because enrolling in a debt relief program does not stop it, and a judgment entered against the business becomes a public court record. And the UCC filing stays on record until a UCC-3 termination is filed, which is why tracking the termination after a balance is paid matters.

How can it affect my personal credit?

Through the personal guarantee. Most MCA guarantees make the owner answerable when the agreement is breached, so a funder can pursue the owner directly. Three things follow from that:

• Collection accounts. A debt placed with a collection firm and reported in the owner’s name can appear on a personal credit report.
• Judgments. Since 2017 the three consumer credit bureaus have not included civil judgments on consumer credit reports under the National Consumer Assistance Plan. A judgment against the owner is still a public court record that lenders can find, and enforcing it can reach personal accounts and, depending on the state, other assets.
• Bankruptcy. If the path ends in a personal bankruptcy, the Fair Credit Reporting Act allows it to appear on a consumer credit report for up to ten years.

Sources: Equifax, Experian and TransUnion, National Consumer Assistance Plan, 2017; 15 U.S.C. section 1681c.

How a specific guarantee reads, and what it exposes, is covered in our guide to MCA personal guarantees. A licensed attorney in your state can tell you what yours means for you.

How long do these marks last?

Sources: Uniform Commercial Code, section 9-515 (duration of a financing statement); Fair Credit Reporting Act, 15 U.S.C. section 1681c. Business credit bureaus set their own retention periods.

What is the honest comparison?

Against the path the debt is already on. A business whose drafts keep failing is usually heading toward default fees, acceleration, UCC notices to its customers, a lawsuit, and a judgment, and a judgment on the guarantee reaches the owner. A negotiated outcome, where funders agree to one, can end that sequence on written terms, but the process can still leave marks, and while terms are being worked out a funder keeps every right its contract gives it. Which path costs less, in credit and in everything else, depends on your positions, and no firm can promise how any funder will respond. Results vary. No outcome is guaranteed.

Does a reduced balance have other consequences?

It can have tax consequences. Forgiven debt can be treated as income in some circumstances, which our guide to whether forgiven MCA debt is taxable explains. Anchor Resolve does not give tax advice; a tax professional should review any reduced balance before it is finalized.

How do I see what is on my reports now?

Your personal reports from Equifax, Experian, and TransUnion are available free each week at AnnualCreditReport.com, the site the three bureaus operate under federal law. Business credit reports are sold by business credit bureaus, and the public UCC record can be searched in your state’s filing office, usually the Secretary of State.

Source: Federal Trade Commission, free weekly credit reports, 2023.

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