A merchant cash advance sounds simple. Your business needs money. The MCA company gives you the cash quickly, without the wait of a traditional bank, and you agree to pay it back out of your future business revenue. Then, as Wilkes-Barre bankruptcy attorney Jason P. Provinzano, Esquire explains in Part 1 of his MCA Trap video series, the withdrawals start — every single day.
That is how merchant cash advance debt traps business owners. When business slows down, the withdrawals keep coming, while you are trying to make payroll, pay rent, buy inventory, and keep the doors open. This guide pulls together all 8 parts of the series in order. Each section answers one question in plain English, with Jason’s video right next to it. You can watch the full series on our Videos page, and learn more about bankruptcy in Pennsylvania on our main bankruptcy page.
Part 1 — How an MCA works, and how the daily withdrawals begin.
How does a merchant cash advance work?
An MCA company advances your business a lump sum of cash, fast. In exchange, you agree to pay back a larger amount out of your future business revenue. Unlike a traditional bank loan with a monthly payment, repayment usually comes straight out of your business bank account in frequent withdrawals — often every business day.
Jason’s warning in Part 1 is blunt: he has seen these agreements absolutely destroy businesses. The money is easy to get. The payback is where the damage happens, because the withdrawals do not pause when your revenue does.
What does a merchant cash advance really cost?
More than most owners expect. In Part 2, Jason walks through a common example: you need $50,000 to keep your business running. The MCA company gives your business $50,000 — and wants $75,000 back, very fast.
Here is the killer, in his words: they start pulling money directly out of your business bank account every single day. Five hundred today, five hundred tomorrow, five hundred the next day. It does not matter if it is a slow month. It does not matter that payroll is due, rent is due, or taxes are due. They get paid first — and that is how merchant cash advance debt starts crowding out everything else your business owes.
Part 2 — $50,000 in, $75,000 back, pulled out daily.
What is MCA stacking?
Stacking is what happens when one advance leads to another. As Jason explains in Part 3, your first cash advance is draining your business account, so you take out a second one to keep the business running. Then you cannot afford both payments, so you take out a third.
Now imagine opening your bank account every morning and watching three or four different companies pull money out — all before you have paid your employees, your rent, your vendors, or yourself. You are no longer borrowing money to grow. You are borrowing money to pay borrowed money back. That is when the whole thing collapses. Jason’s advice: if you are a Pennsylvania business owner caught in this circle, do not wait until the account hits zero or is overdrafted.
Part 3 — Stacking: three or four advances hitting one account, every day.
Does your LLC protect you from MCA debt?
Not necessarily — and this is where many owners get a painful surprise. In Part 4, Jason explains that a lot of business owners assume that because the MCA was taken out by their LLC, they cannot be personally liable, so they can simply close the business and walk away. It is not that easy.
Buried in many of these agreements is something extremely important: a personal guarantee, or PG. That means if the business cannot pay, the MCA company can collect from you personally. Now you are not just worried about the business account. You are worried about your personal bank account, your income, and potentially other personal assets, depending on the agreement and the applicable law. Before you assume closing the business ends the problem, someone needs to read what you actually signed and build a game plan.
Part 4 — The personal guarantee: why your LLC may not shield you.
What is a confession of judgment in Pennsylvania?
Imagine getting sued — and a judgment is entered against you before you have any ability to defend yourself or walk into a courtroom. In Part 5, Jason explains that some commercial agreements contain confession of judgment language, allowing a creditor to seek a judgment against you if you default, without going through the normal lawsuit procedure first.
If you personally guaranteed the agreement, the consequences can reach beyond the business and attach to you directly. That does not mean every confession of judgment is valid, or that you cannot fight it. But Pennsylvania has very specific rules governing these judgments, and you need to act very quickly. If someone tells you there is already a judgment against you, do not ignore it — get legal advice immediately.
Part 5 — Confession of judgment: judged before you can defend yourself.
How fast can the daily withdrawals drain your account?
Faster than you think. In Part 6, Jason describes a small business owner who wakes up on a Monday morning with $8,000 in the business account — and by lunchtime, it is gone. Many MCA agreements allow the company to automatically withdraw money from your business bank account, sometimes every single day.
With two, three, or four MCAs, it gets worse. Money comes in from your customers, and the MCA companies are already waiting for it. Meanwhile, payroll is Friday, rent is due, vendors need to be paid or they will not deliver, and taxes are coming. This is the point where owners can make a huge mistake — just closing the bank account. Before you do that, Jason says, understand the agreement and the potential consequences.
Part 6 — $8,000 in the morning, gone by lunch. Why not to just close the account.
Should you block the ACH or close the account?
Be careful. When the daily withdrawals are crushing your business, your first instinct might be to block the ACH or close the account. In Part 7, Jason warns: read the agreement first. Some MCA contracts treat interfering with the company’s access to your bank account as a default — in fact, most do.
Once they claim you are in default, things escalate quickly. They may demand the remaining balance in full. They may pursue the business. They may enforce a personal guarantee. They may take whatever other collection remedies are available under applicable state law. You may well need to stop the bleeding — but do not start moving money around without understanding what happens next. Have a plan before you pull the plug.
Part 7 — Blocking the ACH can be treated as a default. Have a plan first.
Can bankruptcy wipe out merchant cash advance debt?
Potentially, yes. Part 8 takes on the biggest case: you owe $200,000 in merchant cash advances — can bankruptcy wipe it out? Jason’s answer starts with the personal guarantee. If you personally guaranteed these agreements, shutting down the LLC may not make the problem disappear. Those creditors may still come after you.
But depending on your circumstances, bankruptcy may be able to deal with those personal guarantees. For some owners that means looking at Chapter 7 bankruptcy; for others, Chapter 13 bankruptcy. The U.S. Trustee Program’s bankruptcy information sheet is a useful official overview of the chapters. Timing matters, Jason stresses: if lawsuits have started, judgments have been entered, or your bank accounts are being attacked, waiting usually does not make the problem any easier.
Part 8 — Owe $200,000 in MCAs? Bankruptcy may wipe it out — timing matters.
What should a Pennsylvania business owner do next?
Do not assume you are trapped — and do not guess from the sales pitch you were given when you signed. The agreements control everything: the payback amount, the daily withdrawals, the personal guarantee, and any confession of judgment. The first step is having those agreements reviewed, before the business — and your personal finances — are completely drained.
Questions about your situation? Call 570-822-5771 for a free consultation.
General information only — not legal advice for a specific situation.
