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How can a COJ affect my business?

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Introduction Small business owners in need of short term funding are sometimes required by their merchant cash advance provider to sign a confession of judgement prior to receiving their funding, without understanding what this means and how it can hurt their business. A confession of judgement is a signed document that gives the lender the permission to enter a judgment against the borrower immediately upon default, often without notice or a hearing. Confessions of judgement are controversial, and not every state allows them, but they are allowed in many states. Where they are allowed, they...

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What is a confession of judgment?

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What is a Confession of Judgement? A confession of judgement, or COJ, is a pre-signed judgment that is designed to ensure that a debt can be resolved without the expense of a court case. COJs are typically separate documents, however sometimes they can be clauses in a larger contract.  Confessions of Judgement and Merchant Cash Advances In the merchant cash advance world, financing providers often require borrowers to sign a confession of judgement.  Court Representation If the borrower defaults on the merchant cash advance without making alternative payment arrangements, the...

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How can an mca affect my business cash flow?

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Small business owners in need of a short-term business loan or quick and easy financing frequently turn to a loan vehicle called a merchant cash advance, without fully understanding how a merchant cash advance can affect their cash flow. Effect on Cash Flow Merchant cash advance payback schemes have the potential to put significant pressure on the daily cash flow of a business. The daily payback of a merchant cash advance can range from low (around 10% of business receipts) to significant (up to 50% of business receipts). When the payback requirement on daily receipts of $5,000 is at a...

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What is a merchant cash advance?

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What is a Merchant Cash Advance? Merchant cash advances are advances of money in exchange for repayment out of future sales or other receipts. The advance is usually repaid based on a pre-agreed percentage of the gross daily receipts of the business, or sometimes by fixed amounts withdrawn from the borrower's business bank account. Sometimes the business' credit card payment processor handles repayment automatically to ensure a frictionless process for the owner and to avoid missed payments, but often the merchant cash advance provider debits the daily payment amount directly from the...

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